By April last year, it had become clear that conditions in China were heading into dangerous territory. Even though most mainstream attention was fixed on the then-still growing stock bubble, there was so much that was wrong almost everywhere else. The economy would not stop slowing, and indeed still has not. The financial system was worse, so much so that in the middle of last March the PBOC decided to just end CNY currency volatility.
Trading sideways for five months is about the most visible signal of distress and turmoil aside from open, crashing disorder; the re-pegging of the currency was just one step shy of that. That leaves two important unanswered questions and a further inquiry about which one of them is the most pressing: what is causing the imbalance such that the PBOC feels the need to so evidently suppress it?; what is the PBOC doing to actually stamp out volatility in CNY exchange, which is not exactly a minor factor?
By July 2015, with Chinese stocks now crashing, the first question was being answered leaving the second open to interpretation (with most ignoring it entirely). I wrote in late July:
This post was published at David Stockmans Contra Corner by Jeffrey P. Snider ‘ March 22, 2016.
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