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It can't be that since their foreign reserves which include foreign currency holdings are declining. The recent turmoil started with an attempt to lower their c
by spikels 11y ago
It can't be that since their foreign reserves which include foreign currency holdings are declining. The recent turmoil started with an attempt to lower their currency but this quickly got out of hand when their stock market crashed so they had to start supporting their currency. To do this they sold foreign assets for foreign currency which they used to buy their own currency.
- exelius 11y agoRight; OP was asking why they would be supporting their currency if they were trying to devalue it. And honestly, the "stock market crash" was just a correction. Yes, it declined by 50% over 2 months. But in the 9 months between September 2014 and June 2015 it had risen by over 250% - these most recent losses represent only about half of the total gains over the last year. China is a fast growing economy, and fast growing economies are volatile and prone to asset bubbles. Its economy is less reliant on its stock market than the US; hence the market can slide way, way further out of equilibrium than in the US because it's not as liquid and is only weakly tied to economic fundamentals.