The Costs of Delay

The PBOC has intervened to defend the yuan since August, but that approach is generating rising costs. Reserves are dropping once again, as outflows are picking up in anticipation of more yuan depreciation. Foreign inflows into China’s bond market reversed in October. Politics and the G20 summit may explain the timing of the currency defense, but delaying this adjustment is slowing inflows, and will produce a sharper eventual depreciation of the yuan.

Posted November 13, 2018
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