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China Moves to Stabilize Currency, Despite Promise to Loosen Control
Another victory for Trump 
China Moves to Stabilize Currency, Despite Promise to Loosen Control
HONG KONG — China has made a big show of gradually loosening its grip on the value of its currency, an effort meant to mollify critics like President Trump and experts who have long urged Beijing to let markets fix financial problems in the world’s second-largest economy.
Late Friday afternoon, however, the Chinese government said, in effect, “never mind.”
Chinese officials said they were “considering” a change in their procedures that would reinforce their control of the currency — a kind of statement usually indicating a policy had already been approved. The move would essentially bring more short-term stability to China’s financial system, already the subject of renewed focus after Moody’s Investors Service downgraded its credit rating on China’s bonds on Wednesday, citing the country’s mounting debt.
But a move with the currency, the renminbi, would signal that China was retreating from promises it made to the world in recent years to open up its financial system — and many economists say China needs to do that if it wants to continue to grow at a healthy, sustainable pace.
Introducing a ‘Fudge Factor’
The China Foreign Exchange Trade System, which is controlled by the central bank, said it might change the way it sets a value each morning around which the country’s currency is allowed to fluctuate through the day.
Every weekday, the government sets a benchmark value for the renminbi against what is supposed to be a basket of currencies, although the dollar dominates. The renminbi is then allowed to rise or fall in value only 2 percent from the benchmark during the day. That benchmark is supposed to be based on the currency’s value the day before.
On Friday, the government said it was considering introducing a “countercyclical variable.” A better name might be “fudge factor.” It means that the government would no longer have to follow the previous day’s closing price in setting that day’s benchmark.
China does not disclose much about the inner workings of its currency, but some variation of the policy may already be in place. The currency has already settled into trading range at or just below 6.9 to the United States dollar, just below the psychologically important level of 7 to the dollar.
Many Wall Street analysts say the currency should be a bit weaker, though they disagree on the degree. More broadly, many say the renminbi is now closer to its true value than it was in earlier years, when Beijing faced deep pressure from the United States and others to more fairly value the currency.
We live in a time in which decent and otherwise sensible people are surrendering too easily to the hectoring of morons or extremists.