PBoC Again: All Is Well

PBoC: The Central Parity of RMB against US Dollar Became More Market-based in 2015
Nevertheless, it is worth noting that the direction and range of movement of RMB against USD are basically consistent with those of USD against other major currencies. Therefore, the RMB has remained generally stable against a basket of currencies.

Overall speaking, improvement in the quotation mechanism has achieved the anticipated results. Going forward, the central parity of RMB against USD will continue to follow the improved quotation mechanism, featuring a larger role of market rates, so as to enhance the market-orientation and benchmark status of the central parity and keep the RMB exchange rate generally stable at an adaptive and equilibrium level.
China wants to have its cake and eat it too. It wants a role for the market and a stable exchange rate. It wants the yuan to slowly shift from pegged to floating, it wants to ease capital controls slowly. Markets don't work that way though; they go through phase shifts. This is why bear markets are so swift, it's why companies go bankrupt slowly and then all at once. The market will play a role in pricing the yuan slowly for as long as the central bank is willing to pay for an orderly depreciation.

Consider this shift in perception: Only a year ago, you would have easily found people saying China's reserves are so large that it cannot ever have a currency crisis. Today? Much closer to the opinion voiced in 2012 by Tan Yaling: PBOC can't buy a buck; talk of depleted reserves is not alarmist
She says there was a recent article stating that if the only way China can stimulate the economy is through investment, then China's $3 trillion in foreign exchange reserves will be exhausted within 5 years.

She says speculation is the greatest threat to China's development and this speculation could exhaust China's reserves. Although China has $3.2 trillion in reserves, it isn't enough to protect it from hot money, not when the global forex market trades $5-6 trillion each day. If there is no long-term strategy to defend the reserves, they could be rapidly exhausted.

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