Zhou Says Govt Must Fix Market

Bloomberg: PBOC’s Zhou Says China's Past Makes Officials Favor Intervention
"Because our country is moving from a centrally planned economy to a market economy, because of our way of thinking, interpretations of market ineffectiveness are more likely," Zhou said at a forum with other top economic officials in Beijing Friday. "To address this ineffectiveness, the government should play a bigger and better role."
On monetary policy vs yuan stabilization:
Yi said at the event that setting monetary policy that’s too loose may put depreciation pressure on the yuan, which fell to a five-year low last month before rebounding this week. He called for monetary policy that’s prudent, appropriate, and flexible.
Hope you like deflation, cause that's what you're getting.


  1. Chances that they let deflation fully happen and hence wipe out the banks = zero. The base money expansion will be fast and furious once the deflation really begins boiling.

    Deflation or inflation for the devaluation does not matter though - it's going to happen. The wealthy Chinese have lost faith in China for many reasons and it's not going to come back until serious changes are made - greed like with QE won't even work either cause the corruption crackdowns are too scary.

    The jig is up until the political landscape has made gigantic changes - and no, I don't mean democracy blah blah.

    - Luke

  2. Yes, if the central bank doesn't inflate the currency, the market will pull the yuan lower and do what is inevitable. Until then, RMB stabilization will keep outflows and deflation going strong.