Profile picture
Brad Setser
@Brad_Setser
, 4 tweets, 2 min read Read on Twitter
So China allowed the yuan to break 7 in response to Trump's latest tariff threat. Not really a surprise, as China had no good options left to tariff. Now the question is how far does China want the yuan to move ...

ft.com/content/be6123…
I agree with Mr. Evans-Pritchard of Capital Economics. The PBOC has the tools to set a new range around the CNY. The question to me is where the PBoC wants to set the new weak edge of a band (v USD and CFETS), and how it goes about doing so
The intervention proxies for July won't be out for another ten days or so, but there wasn't any real sign of pressure leading into this move -- it looks like a discretionary response to Trump's new tariffs.
One technical note -- the settlement numbers were surprisingly good in May and then surprised in the opposite way in June (it would have made more sense if the numbers were bad in May and stabilized in June). and PBOC balance sheet has been almost too quiet ...
Missing some Tweet in this thread?
You can try to force a refresh.

Like this thread? Get email updates or save it to PDF!

Subscribe to Brad Setser
Profile picture

Get real-time email alerts when new unrolls are available from this author!

This content may be removed anytime!

Twitter may remove this content at anytime, convert it as a PDF, save and print for later use!

Try unrolling a thread yourself!

how to unroll video

1) Follow Thread Reader App on Twitter so you can easily mention us!

2) Go to a Twitter thread (series of Tweets by the same owner) and mention us with a keyword "unroll" @threadreaderapp unroll

You can practice here first or read more on our help page!

More from @Brad_Setser see all

Profile picture
Brad Setser
@Brad_Setser
The U.S. Treasury it seems has decided to name China a currency manipulator roughly 12-13 years after it should have first named China, and roughly 5 years after China stopped manipulating ...

(1/x)
The standard definition of manipulation these days is intervention (buying foreign exchange in the market using the government's balance sheet) to maintain a large (more than 2% of GDP per the Treasury's latest fx report) current account surplus.
China first met that threshhold in late 2003, but it was close -- the current account (as now measured) only just topped 2% of GDP (China's methodology has changed over time).

But there was no real doubt from 2005 to 2008 (and again the years immediately after the crisis)

3/x
Read 11 tweets
Profile picture
Brad Setser
@Brad_Setser
The U.S. faces one fundamental problem in a currency war with China: right now, the market wants to push the yuan weaker, and the more the U.S. escalates, the more the market will test the PBOC ...

ft.com/content/9d24c1…
a bit more color ...

China clearly met the current criteria for manipulation from 2003 to 2013 ...

but it hasn't been consistently intervening to block appreciation over the last five years.
The Treasury though is operating under a different theory of the case, namely that China should be as aggressive in resisting pressure on its currency to depreciate (now) as it was in resisting pressure for appreciation during the China shock years.

home.treasury.gov/news/press-rel…
Read 12 tweets
Profile picture
Brad Setser
@Brad_Setser
Bermuda alone accounted for over a quarter of all dividends paid by the subsidiaries of US companies abroad back to their U.S. parents in 2018.

(e.g. why you need to understand tax to understand the balance of payments these days)

(1/x)
Ireland incidentally was suppressed b/c it would reveal too much about the finances of a single company (odds are, Apple, as it is now an Irish tax resident)

(2/x)
And a more subtle point -- the fall in US FDI abroad in 2018 was all from "holding companies" who paid $319b back to their parents in 2018 (that's the repatriation of the "offshore" cash). Real investment abroad continued to increase

(3/x)
Read 5 tweets

Related threads

Profile picture
Lingling Wei
@Lingling_Wei
Gloves are off. China’s central bank doesn’t have the authority alone to let the yuan break 7. The move had to be signed off by the top leadership. Weakening the yuan is a clear response to Trump’s new tariff threats.
Acute market people all remember how hard PBOC had intervened to prevent yuan from breaching the 7 threshold. Once, when some data provider quoted it beyond that level, PBOC issued a denial within minutes--and had to write up a report to the leadership explaining what happened.
Still, the PBOC won't allow a free fall of the yuan. That's not in China's interests, either. It's a tough balancing act for the monetary authority. Only one thing is certain for now: capital controls will only get tighter in China.
Read 4 tweets
Profile picture
IndoPacific_SCS_Info
@IndoPac_Info
#China backtracked on nearly all aspects of #US trade deal - All of us that follow & know China knew that this was never going to fly. You can't negotiate with a rogue, predatory state like China. This is for the better. mobile.reuters.com/article/amp/id…
The diplomatic cable from Beijing arrived in Washington late on Friday night, with systematic edits to a nearly 150-page draft trade agreement that would blow up months of negotiations. The document was riddled with reversals by China that undermined core US demands, sources said
In each of the 7 chapters of the draft trade deal, China deleted its commitments to change laws to resolve core complaints that caused the US to launch a trade war: theft of US IP & trade secrets; forced tech transfers; competition policy; access to financial services, etc, etc.
Read 43 tweets
Profile picture
Facts Central
@StillDelvingH
Who funds the IEA, the TPA, the ASI &co?
You know, the RW 'free trade' thick tanks advocating tax havens, "freedom" (no regulations like workers' rights or environmental protection), no welfare (no tax & no free healthcare).
Basically, "Only the wealthier survive" philosophy?
1/n
*Could it be* that it has something to do with defending their funders' interests?
Today, I'm going to tell you the Thick Tanks' Hydra tale.
Featuring Atlas, huge piles of money, tradition, "free speech", useful idiots and a very clear agenda that Brexit/Trump are a part of.
2/n
Take a seat: It's a long story, with a lot of players, including politicians, pretty ladies squatting your TV, the climate change denial's network, the global fascist movement, Silicon Valley/multiname data-stealing/misusing company & private companies' involved in elections.
3/n
Read 249 tweets
Profile picture
Christophe Barraud🛢
@C_Barraud
🇨🇳 #CHINA Q3 GDP Y/Y: 6.5% V 6.6%E (slowest growth since Q1 2009)
*NBS spokesman Mao Shengyong said that the international situation was bringing “downward pressure” on China.
*Link: bloom.bg/2RVX1ZA
🇫🇷 🇪🇺 🇨🇳 French tire maker Michelin warned of declining sales in Europe and #China in the second half of the year, dragging down shares of its competitors in the U.S. and Europe - Bloomberg
*Statement: bit.ly/2EujhqH
🇺🇸🇨🇳🇪🇺 In a volley of filings, the EU, #China and the U.S. this week escalated disputes over new U.S. metals tariffs, the European response to those levies, and Chinese intellectual property practices - Bloomberg
bloomberg.com/news/articles/…
Read 634 tweets
Profile picture
Zach Everson
@Z_Everson
Trump Hotels' website still lists Trump SoHo New York among its properties in the Our Hotels menu. Select its name though to access its page and there's a message about it being renamed

bit.ly/2EPCSy1
National politics correspondent for Newsweek, Nina Burleigh, with a fun find on a TV above the bar at the Trump Hotel DC bit.ly/2E37QRR
Two errors in the 2nd graf of Breitbart's Trump Hotel DC article:
-holdings aren't out of @realDonaldTrump's hands: trust isn't blind & he can profit from it
-Trump Org told Congress it was estimating foreign receipts—not auto donating in full
bit.ly/2CpL7z2
Read 1562 tweets

Trending hashtags

#TickTock #Turkish #ZTE #Saddam #CRISIS #PANIC #Mother #TradeWar #Skripal #HandsOffVenezuelaTrump #Trump2020 #RIP #SAVEAMERICA #Pope #Prestitute #Sinjar #AEI #USAF #Cybersecurity #Auto #France #SHAFR2019 #KAG #EuropeanUnion #Beirut
Follow Us on Twitter!

Did Thread Reader help you today?

Support us! We are indie developers!

This site is made by just three indie developers on a laptop doing marketing, support and development! Read more about the story.

Become a Premium Member ($3.00/month or $30.00/year) and get exclusive features!

Become Premium

Too expensive? Make a small donation by buying us coffee ($5) or help with server cost ($10)

Donate via Paypal Become our Patreon

Thank you for your support!