“For everybody who thought China was heading for a hard landing, it’s over.”19 April, 2012, 21:24. Posted by Zarathustra
Tags: Chinese Yuan, CNY, RMB, Sarcasm
Albert Edwards of Société Générale uses this quote as the title of his latest note, which leads you and I to be puzzled that Albert Edwards has switched side.
As it turns out, Albert Edwards simply went for the bloke who was being quoted on Reuters saying that:
"For everybody who thought China was heading for a hard landing, it’s over. This move says they are comfortable with the direction the economy is moving in," Paul Markowski, president of New York-based MES Advisers and a long-time investment adviser to China’s monetary authorities, told Reuters.
And so, here comes with the rebuttal:
Just look at the recent tendency of the currency to weaken within the previous trading ±0.5% band (see chart below). With China’s mega current account surplus now virtually gone, the IMF has admitted they were wrong and the yuan is no longer overvalued. As we have long noted, downward forces on the yuan are mounting. Not only is a hard landing in China still likely, but the recent widening of the band makes devaluation even more likely.
Source: Société Générale
If my view isn’t already clear enough, the widening of trading band of the Chinese Yuan is a signal of everything BUT that the government is confident in their effort to avoid hard landing, and I expect that Chinese Yuan could depreciate if the economy slows too much (which it most probably will). Indeed, as I have mentioned many times, Chinese Yuan has already stopped appreciating, a reflection of anything but confidence from the Chinese government.