China battles to shore up stocks, yuan after globe-shaking slide | Hacker News Reader

China battles to shore up stocks, yuan after globe-shaking slide

reuters.com

50 pointstokenadult25 comments

"globe-shaking" "currency tumbled" "wild price swings" These terms are relative to whatever stability what there in the recent past. No matter how stable a market is, when it starts to change, reporters are going to label it like that. The reality is everything's just fine. Look at the price of CNY in USD for the last 5 years. Before 2011 it was even lower, and nobody cared then.

http://www.xe.com/currencycharts/?from=CNY&to=USD&view=5Y

It's swung over a 10% range during that entire period. Who cares about 10% change in 5 years? This might be a small surprise for traders who expect it to change by less than a fraction of a percent each day, but for normal people it's not relevant. If the economy is collapsing, this exchange rate certainly isn't a sign of it.

I'd have thought implementing rule that halts trading when the index drops by X% would make a sell off worse, because nervous investors even considering selling will rush to do so before the threshold gets breached.

They're also putting some bans in place on certain shareholders (groups owning over X% of a company can't sell stock, etc.), presumably to stem such panic selling.

The drop is happening regardless. All the halt does is give space for rational thinking. Stocks actually worth something should go up whilst others plummet.

People are panicky animals. Even fundamentally sound stocks will fall alongside the dogs.

All true, but remember that even the fundamentally sounds stocks got seriously overbought in 2015.

https://www.google.com/webhp?sourceid=chrome-instant&ion=1&e...

(change the chart to a 5 year view)

Thanks for that!

If I understand this correctly:

1.) The Yuan and Chinese stocks dipped severely.

2.) The Chinese Central bank put up $20bn to compensate.

If my understanding is correct, this could be good for the Chinese economy? It reduces the value of Yuan to the ROW (rest of the world), thereby decreasing the cost of Chinese goods and increasing exports to the ROW.

I'd like to caveat with my knowledge of the Chinese economy and how it operates is probably well outdated.

Last I knew, it's growth was very export driven and thus dependent on foreign markets. It was also very strongly influenced by the Chinese government.

It may now be the case now that it has enough inertia from those days to grow (and hit financial targets) by simply bringing up its own population (economically). Thus this is a real risk in the Chinese economy and I am an ignorant ass.

Would anyone mind illuminating the situation for me with with some data, please?

I'm happy to have been way off the mark and an ignorant ass. Learning is cool.

1.) yuan devaluation -> (accelerating capital flight + Chinese companies needing to pay more on their dollar denominated debt (more defaults) + decreasing reserves + declining stock market/RE/assets held in yuan) >>> increased export

2.) yuan devaluation -> increased export + more money for business owners (whose money leaves China) + less money for Chinese workers/consumers + no social safety net -> spending is stagnant

I suspect this is going to be the economics story of 2016, the one where China decides to jump in on the world stage and discovers the limitations imposed by participating in that stage. What I hope we end up with is a much more transparent view of the Chinese economy.

A transparent view would be 1-2 percent gdp growth, 300 percent gasp/debt ratio, bankrupt shadow banking, bankrupt commodity related state companies, a trillion left that can be used from reserve, 800 billion per year capital outflow, etc. not sure China can even take that first step. Not to mention lack of global consumer brands, pollution, corruption, etc

> 1-2 percent gdp growth, 300 percent gasp/debt ratio ...

Are these numbers real? If so, what are they based on? If they are just examples of what might be found under the hood, that's fine; I'd just be interested in some reliable non-official economic numbers.

2% gdp growth http://www.barrons.com/articles/anne-stevenson-yang-why-xi-j...

300% gdp/debt http://www.bloombergview.com/articles/2015-11-01/china-shoul...

bankrupt shadow banks http://www.ft.com/intl/cms/s/0/06cc9b9c-44c4-11e5-b3b2-1672f...

bankrupt state commodity firms http://www.bloomberg.com/news/articles/2015-10-14/the-next-c...

not much reserve reserve http://www.theepochtimes.com/n3/1756239-china-may-have-to-se...

500 billions in capital flight in Q3 http://www.forbes.com/sites/gordonchang/2015/11/01/a-half-tr...

No, just a 'greatest hits' compilation of the same things China detractors have been complaining about since 1995. Their analysis is no better than the already dubious "official" numbers.

> a 'greatest hits' compilation of the same things China detractors have been complaining about since 1995

That's what we would expect to see in a bubble, criticisms that aren't coming true until the day it pops. How do we distinguish this situation from a bubble?

If it were possible to distinguish it reliably, we'd get rich (and the bubbles wouldn't happen in the first place).

I expect it is somewhere between the complete dystopia you suggest and the rosy double digit growth the party suggests :-).

But yes, it would be good to know what the reality is.

check my links above. but also, do you think a normal economy needs the government to

- limit citizens withdraws abroad

- prevent majority holders of more than 5% of a company to sell their shares

- stop the entire stock market from trading after a 7% decline

- limit $50k/year limit transfer out of china

Haven't most of those limits (Minus the stock market ones) been in place for a number of years?

Also, most stock markets have stop-trading circuit breakers.

If China's GDP has been growing at ~1-2%/yr, why does the air in Beijing look like soup?

It's been like that for a long time. They shut down a ton of factories for a month to have clear skies for the olympics in 2008. It's been getting worse, but I don't know that it's all that much worse.

the stock market stopping trading after a drop is a property of pretty much all stock markets right?

As to the other points, that seems much more like social/corruption control than anything else.

sharetea is closer than the govt figures.

Smoking gun is capital flight by Chinese themselves.

I'd heard that China is going in debt before but how that is even possible? I though US is getting pushed in debt because of China. If everyone is going on debt, who the hack is giving all these loans?

The latest news update shows the China market (where it is now already Wednesday, a new trading day) down some more, and the global geopolitical news for China is not good, with north Korea claiming the test of an H bomb. The signs of market weakness from economic weakness and political risk appear to be genuine.

http://www.reuters.com/article/us-global-markets-idUSKBN0UK0...

This kind of move seems to be a global trend. BOJapan is going to spend $2.5B to buy ETFs.

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