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Where Is China Going after RMB Hits “Red Line” For Losses?

2014-3-24 13:53:00
Since mid-February, the RMB has experienced a steady and
rapid depreciation by more than 3%,
exceeding the total appreciation over last year.
The devaluation has consequently caused the outflow
of hot money, a decline in economic growth,
and dropping of real estate.
How will the Communist regime face the economic crisis?
Please follow our report.

The RMB fell the lowest
from March last year to 6.2255 per dollar.

The Wall Street Journal (WSJ) reported that with the RMB
now crossing the 6.20-per-dollar threshold,
“Market players have warned that breaching that level
would trigger collateral calls on investment products that could unleash even more instability in the currency.”

The leveraged contracts such as target-redemption forwards
are structured to pay out monthly if the yuan has passed a specific threshold against the dollar.

One of the world's largest and most influential financial
services institutions "Morgan Stanley" estimate,
since last year, Chinese investors bought $ 350 billion of
such offshore forward contracts,
" downside protection " are situated in close to 6.20 , now
with the devaluation of the RMB has lost $ 3.5 billion.
If the yuan continues to depreciate, then
the loss to investors will continue to increase.

China state-run media says that the RMB devaluation will
accelerate the bankruptcy of the rich.
Tycoons who are doing business in the popular trade sectors,
such as copper, iron ore, soybeans, palm oil, rubber, zinc,
aluminum, gold and nickel, will be affected.

Xie Tian, Professor of University of South Carolina Aiken
suggests that RMB depreciation of 3% is under the acceptance
range of Chinese Communist Party (CCP).
Because the CCP can use methods of selling dollars to appreciate RMB.
However, will the CCP carry on selling dollars if the yuan
continues to depreciate?

Xie Tian: “The major factors causing RMB depreciation are:
China’s foreign trade isn’t strong enough, it started declining;
The
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