East Asia Rises: Japan, China seek new dialogue on yuan, China reforms: Nikkei

[Aepsilons]

@Shotgunner51 @TaiShang @Arryn et al --- Great read !



Japan and China are working to create a new framework to bring together government and central bank officials to discuss economic policy coordination, such as steps to stabilize the yuan, the Nikkei newspaper said on Tuesday.

The move, which comes as concern over China's economic slowdown jolts financial markets, could help ease market strains by signaling that Asia's two largest economies are working together closely to stabilize global growth.

Japan hoped to assist China's efforts in reducing excess capacity and reorganizing state-owned companies through the new framework, while China would aim to draw more direct investment from Japan, the Nikkei said.

The pair hoped to reach an agreement in March to create the new framework by the end of this year, which would also address issues like taxation, the paper said.

The Bank of Japan and the People's Bank of China could use the dialogue to discuss resuming their yen-yuan currency swap arrangement, it said.

(Reporting by Leika Kihara; Editing by Paul Tait)


http://uk.reuters.com/article/us-japan-economy-china-idUKKCN0V32T6

 

[Aepsilons]

Japan hoped to assist China's efforts in reducing excess capacity and reorganizing state-owned companies through the new framework, while China would aim to draw more direct investment from Japan, the Nikkei said.

 

[TaiShang]

The pair hoped to reach an agreement in March to create the new framework by the end of this year

A new framework for a better streamlined economic relationship will doubtlessly benefit both sides. Deeper integration between two close neighbors is a sign of a further return to normalcy.

 

[Shotgunner51]

Good progress!

The two sides can complement each other, Japan has excess tech, China has excess capacity. A closer financial pact (Currency; FDI) will be catalyst for integrating these idle resources.

The two are largest creditor nations, however in my opinion both (including China Taiwan) are over-vested on dollar-denominated financial products. With continual "Rise of US" debt ceilings (public, and external), it has become more pressing than ever for both to re-engineer their external balance sheets. Once the top creditor nation (not Japan) till Reagan times, now US net investment position has further slipped to negative $7.2698 trillion. It's not too late yet but China and Japan should get prepared in advance. Greek GRD is not international reserve currency, but the dollar is.

http://bea.gov/newsreleases/international/intinv/intinvnewsrelease.htm​

The difference between two countries is that China still has large internal markets yet to be developed, especially in mid-west, that's good opportunities for Japanese FDI which is still at low level (only 2.84% of inbound FDI to China came from Japan). Sector-wise, it's good to see Japanese FDI going into SOE or SIE, since that will push excess capacities (e.g. steel, aluminium, PV) towards market-orientation. More domestic credits in China can then be channeled to the POE.

The two should press forward to complete a FTA framework that covers BIT (bilateral investments), includes SK if convenient.

 

[Abacin]

@Shotgunner51 @TaiShang @Arryn et al --- Great read !



Japan and China are working to create a new framework to bring together government and central bank officials to discuss economic policy coordination, such as steps to stabilize the yuan, the Nikkei newspaper said on Tuesday.

The move, which comes as concern over China's economic slowdown jolts financial markets, could help ease market strains by signaling that Asia's two largest economies are working together closely to stabilize global growth.

Japan hoped to assist China's efforts in reducing excess capacity and reorganizing state-owned companies through the new framework, while China would aim to draw more direct investment from Japan, the Nikkei said.

The pair hoped to reach an agreement in March to create the new framework by the end of this year, which would also address issues like taxation, the paper said.

The Bank of Japan and the People's Bank of China could use the dialogue to discuss resuming their yen-yuan currency swap arrangement, it said.

(Reporting by Leika Kihara; Editing by Paul Tait)


http://uk.reuters.com/article/us-japan-economy-china-idUKKCN0V32T6

A strong coordination is always encouraged. The whole world is on the same boat!

However, USD/CNY only varied from 6.1 to 6.7. The whole range is less than 10% for the last several years, which is significantly less than EUR, JPY etc. Most of them have dropped more than 30%. Just several hours ago, JPY dropped 2% within 5 minutes. When Japan says yuan stabilization, is it sarcastic?

While the whole world blames China for the current financial crisis, the real problem is created by countries such as Japan, USA and Europe. Most of them adopt zero interest rate policy, which encourages financial speculation and reduces economic productivity as proved by Japan's lost two decades. The prices of financial assets go volatile because they are way over valued.

For next several years we are going to see financial bloodshed and economic crisis much more severe than that of 2008. What's happening in resources countries are just the preface of the whole crisis. This is really the game for survival of the strongest with nearly zero ammunition from major central banks. China's 2% interest rate is almost the only ammunition among major economic powers, which China will only use it to self-protect ourselves. US will more and more rely on the dollar power to protect itself. Many countries such as Vietnam and India, still dreaming for rapid growth, will become empty dreams. Their growth, in terms of dollars, is nearly none, or negative. Many countries are hoping for a China-USA war to solve this crisis. However, it may be more possible that USA and China bundle together for survival.

 

[Jlaw]

LOL. Laughable. Amidst a Chinese slowdown and yuan stabilization? Has anybody realized the yuan has only dropped 5% against USD since this stock market fiasco started? Is it by design or not?
Assume it's not by design, why is yuan depreciating? China want the yuan to be internationalize sooner or later. IMF's inclusion of the yuan as part of SDR will cause fluctuation to the yuan in the short term--not a China collapse echo by simpletons

http://globalriskinsights.com/2015/12/impacts-of-the-yuans-inclusion-in-the-sdr-currency-basket/

"How will this recognition affect the yuan? One of the requirements for a currency to be included in the SDR basket is that it should be “freely usable”. After the announcement, the People’s Bank of China stated it would allow the currency to be increasingly determined by market forces.

In the short-term, this may lead to more volatility."

@Shotgunner51 any thoughts on this?

 

[Aepsilons]

However, USD/CNY only varied from 6.1 to 6.7. The whole range is less than 10% for the last several years, which is significantly less than EUR, JPY etc. Most of them have dropped more than 30%. Just several hours ago, JPY dropped 2% within 5 minutes. When Japan says yuan stabilization, is it sarcastic?

Any reverberation(s) in Chinese economy is felt also in Japan. More so than any other partner state, actually. Japan and China, despite political differences, are so deeply integrated it is not even funny. Unfortunately, Japan's leadership is under influence from outside players that infuences it to adopt policies that are actually detrimental to Japan's interests.

LOL. Laughable. Amidst a Chinese slowdown and yuan stabilization? Has anybody realized the yuan has only dropped 5% against USD since this stock market fiasco started? Is it by design or not?
Assume it's not by design, why is yuan depreciating? China want the yuan to be internationalize sooner or later. IMF's inclusion of the yuan as part of SDR will cause fluctuation to the yuan in the short term--not a China collapse echo by simpletons

http://globalriskinsights.com/2015/12/impacts-of-the-yuans-inclusion-in-the-sdr-currency-basket/

"How will this recognition affect the yuan? One of the requirements for a currency to be included in the SDR basket is that it should be “freely usable”. After the announcement, the People’s Bank of China stated it would allow the currency to be increasingly determined by market forces.

In the short-term, this may lead to more volatility."

@Shotgunner51 any thoughts on this?

Buddy,

Devaluation is part of market principles for re-orientation to a more market economy -- in context to China's reorietnation goals. Secondly, the Yuan actually appreciated 33% to the USD overall throughout the years. So this recent devaluation of some 5-7% is minor, rather it is done so to encourage domestic spending and consumption. China's own domestic market (1.4 billion) is larger than most of the world's markets , combined.