“Declaring war on China’s currency? Ha Ha”….

100 Yuan

Last week was another challenging week for mainland Chinese shares, with the Shanghai Composite Index of mainland shares falling -6.14%, bringing the decline in January to -22.65%. The index is now down -47.01% from the bubble high reached in June 2015.

Efforts by the Chinese authorities to revive the market have been fruitless, with all the gains since the end of August eroded over the last five weeks. The stock market is just one of the indicators which reflects the increased risk of a hard landing in China.

However, it seems talk of a hard landing is beginning to ruffle some feathers in China. At the World Economic Forum in Davos, legendary investor (speculator) George Soros said in an interview with Bloomberg that “a hard landing is practically unavoidable”.

Known as the “man who broke the Bank of England”, after he made a reported $1 billion profit in 1992 betting against Sterling as the UK government was forced to abandon the European Exchange Rate Mechanism, his bearish opinion on China has not gone unnoticed.

In response, the People’s Daily, the official newspaper of the Chinese Communist Party, and the unbiased source of news content for the Chinese people, featured a number of articles (see below) hitting back at George Soros, the “financial crocodile”. One editorial which made the front page, written by Mei Xinyu, a researcher at the Ministry of Commerce, had the ridiculous title: “Declaring war on the Chinese currency? Haha”. 

In my mind, the above displays weakness and a growing unease in China. Also, it merely draws further attention to the risk of a hard landing among the financial community. The market opinions of George Soros carry weight and the response from China has simply reaffirmed that.

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