Bank of America raise questions on the yuan, asking Could China suffer a currency crisis?
But, and here’s the good news, they answer the question too!
If
they panic and rush to the exit, there simply wouldn’t be enough
reserves to satisfy demand for US dollars. This could well become a
second-generation crisis: if enough retail investors fear a crisis, it
will be self-fulfilling. Of course, pinning down the timing of such an
outcome is quite difficult. China bears have been calling for a hard
landing for years; others have been forecasting a double-digit
depreciation in the CNY since the second-half of last year. As is the
case with all second-generation model dynamics, the crisis is not
inevitable.