Last weekend, an official in China’s foreign exchange regulatory organization said something alarming.
The Financial Times recently reported, “China’s financial system is ‘largely stable and healthy,’ the country’s foreign exchange regulator said at the weekend in an effort to reassure global markets as investors braced for a possible resumption of last week’s market turmoil.”
As we recently wrote, when a politician tells you that you shouldn’tworry, that’s the exact time you should begin to worry. So telling everyone there’s no need to worry is, in itself, a very real reason to worry.
Back in early December, the Wall Street Journal wrote, “’In terms of whether the renminbi will depreciate after its inclusion in SDR, there is no need for such a worry,’ Yi Gang, a deputy governor at the PBOC [China’s central bank], said at a news conference.”
But in fact, there was need for such a worry. Since then, the renminbi has fallen 2.5% – a huge move for the renminbi.
As we wrote yesterday, things are most likely only going to get worse for the yuan. And an official explaining that everything is fine is only further evidence.