Quoth China’s central bank governor Zhou Xiaochuan earlier this week, lending weight to the theory that the PBoC couldn’t run a bath:
“The continuation of extremely low interest rates and unconventional monetary policies by major reserve currency issuers have created stark challenges for emerging market countries in the conduct of monetary policy”.
Well then if those extremely low interest rates in major reserve currencies are causing “stark challenges” for the “conduct of monetary policy”, maybe you shouldn’t peg your currency to those major reserve currencies with extremely low interest rates. Just a suggestion.
And then there’s this:
But he warned not to expect immediate changes, comparing the policy to a Chinese doctor putting together a package of 10 herbs to cure an illness. “It solves the problem not overnight, but in a month or two months,” he said to laughs at a meeting of the Institute of International Finance, a bankers’ trade association.
So if China’s economic policy is like the workings of a TCM doctor, does that mean he’s advocating fixing the world’s trade imbalances by resorting to the placebo effect? (And the 2% depreciation in USDCNY over the last few months is nothing if not a placebo.)