FXStreet (Guatemala) – Analysts at Brown Brothers Harriman explained that many observers would have us believe that Chinese policy makers, frustrated with the drop in the stock market and the weakening economy, and opted to move backwards to mercantilism.
Key Quotes:
“Instead, we suggest that last week’s measures were about going forward: Going forward with the liberalisation of the exchange rate mechanism that both the IMF and the US have been advocating.”
“Chinese officials are committed to the transition to more consumption and service-oriented growth. A slightly rich currency is conducive for this process.”
“One of this year’s policy goals was to have the yuan be included in the next rendition of the SDR basket. We think that the move on the exchange rate mechanism, especially if implemented as officials suggest, makes it more likely not less than the yuan will be included.”
“The IMF’s recently issued staff report recognized the hard work China has already done but calls for it to do more. It was running out of time before the IMF’s formal SDR decision and, before the Fed’s lift-off, which would only complicate such a move later.”
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