Devaluation can be accomplished by edict if necessary. The government could unpeg from the dollar too and create the conditions for a devaluation. Lots of ways actually. Right now they are contemplating reducing the Reserve Requirements for banks again as well as lowering the bank rate and both are seen as stimulative. Infusions of fresh cash directly into the economy as is being done with the stock market may play a role. Keep in mind that the Chinese government has transferred untold billions directly to investors by this route already. Plenty of ways to skin a cat if that is the goal.

Thanks for the comments even it does not address my question of trade surplus. People in china has been complaining about inflation and a devaluation could get people excited. Unless American, people revolt there. There have been a lot violent attacks against establishment already.

Lawrence, a devaluation would amplify the inflation there. It means Chinese purchasing power is falling versus other currencies but it could stimulate domestic demand. The worry the government has expressed is that a devaluation might cause capital flight from the country to accelerate as a technique of wealth preservation. Sorry but I have not been following the trade surplus there but am aware its in decline. I will have a look. Meanwhile, there is the potential of Chinese economic problems spillin gout of their borders on a whole lot of fronts. One could be that more money enters foreign stock markets. Another is that real estate in places like Vancouver and other sought after destinations might finally go into a parabolic rise. We should keep in mind that would spell the end of a lot of other bubbles around the globe since we are talking pretty serious amounts of money. There was an old quote about capital shifting around the world during the last depression like a loose cannon on a ship. This could be about to repeat. Can’t recall who said it though. A president maybe?

As for the data on June, this year’s trade surplus is the record high. It is especially high versus US. Not sure about July yet but monthly number is very volatile since China does not seasonally adjusts the number. Chinese has been upset about inflation a lot and I have heard complaints all the time. If inflation picks up, instead of buying more goods, people will buy real estate. Also the violence toward leaderships grand kids or relatives will increase. Not every kid can have body guards. My sister operates day care. She is so worried about killing of rich kids. Some Chinese leaders openly admire law obeying Americans and condemn Chinese as unruly.

I had no idea Lawrence! Is that how they settle scores in China? By killing the children of the leadership? Maybe it really is as unstable an environment as some have suggested. But do you think it could lead to a change of government or a widespread public revolt? Very curious to hear your take on this actually since you have lived most your life there.

There have been revolts for last few decades. It actually never stopped after Mao died. Chinese society honors revenge. However, only the country wide revolts which target government can threaten government control and it is what leaders are trying to avoid. The current government is a$$ kissing the people to buy their support. He has increased the pension for old people and crack down on corruption. There have been many assassination attempts on him and he starts to get some support from the people. Small incidents happen all the time. I can give you many examples. For example, one guy was speeding with his bicycle and got stopped by police. The police victimized him by over use of their power. The guy got so pissed and he ran into police station and killed 7 police. When it was reported, most people hailed him as hero on the Internet. He was executed off course. So people in the West does not understand China. The society and culture are different. Robinhood is considered hero in China.

Thanks for the answer Lawrence. Are you saying there have been attempts on the leaders life though? It is the first I heard of it. Normally that would be pretty big news around the world.

Yes, it is why one of the top leaders was arrested because he plotted to kill Xi. There have been many known

But China never report this kind of plots since it is very destabilizing.

A Listener, It was President Herbert Hoover

So is this an answer to Christine Lagarde? Did the Bank of China just tell her to get lost since there is not going to be inclusion into the SDR this year? Or is the Yuan being opened to market forces at the IMF’s request? Because the way I just read that article it is implying that the peg is being dropped and the Yuan will just float to its own level. And if that’s the case this is a huge story. Up until now, Chris, the rate was set at what ever level they chose. By dictate basically. But it is entirely contrived and does not carry meaning outside China. If the peg is dropped then the currency gains legitimacy in traders eyes as it will be allowed to rise or fall to its own level. I am wondering what was behind that move though. Kind of funny. We were just talking about this yesterday. At first I thought you were just fooling around posting an article that the Yuan was being devalued.