What Will China Dump Next, After Treasuries, to Keep Control?

[marmar]

What Will China Dump Next, After Treasuries, to Keep Control?
by Wolf Richter • January 11, 2016


[font color="blue"]“Practically boundless” future capital outflows.[/font]

“Beneath all of the financial turbulence there lurks, in my view, a credit crisis; I fear the worst now,” UBS economic adviser George Magnus told Bloomberg TV today. The reform agenda “has stalled,” he said, and “things are looking much bleaker for China going forward.”

And so on Monday, we got another flavor of it.

The Shanghai Composite index plunged 5.3%, to 3016, down 15% so far this year. The Shenzhen Composite fell 6.6%. Hong Kong’s Hang Seng fell 2.8% to 19888, below 20000 for the first time since June 2013, and down 30% from its April high.

Everyone had hoped that China’s “National Team” would jump into the fray and bail everyone else out, but it didn’t. And the People’s Bank of China didn’t offer any big new remedies either. But it did stabilize the yuan after it had dropped 1.5% against the dollar last week, and about 6% since mid-August.

In Hong Kong, interbank yuan lending rates broke all records since the Treasury Markets Association started compiling the data in June 2013, with the overnight Hong Kong Interbank Offered Rate spiking 939 basis points to 13.4%. ................(more)

http://wolfstreet.com/2016/01/11/what-will-china-dump-next-after-treasuries-to-keep-control/

[roamer65]

1. China will break the currency peg and devalue.

A lot of currency pegs to the will be broken as dollar liquidity dries up. They have no choice but to break them and reflate in their own currencies.