China mouthpiece warns Soros against shorting renminbi
George Soros, the man who broke the Bank of England and, according to some, helped precipitate the Asian financial crisis has been warned off going to “war on the renminbi” by Beijing.
The warning, on the front page of China’s Communist Party mouthpiece, comes as Beijing is struggling to stem capital flight and support its currency, in part through massive intervention that has scythed its foreign reserves by about $700bn over the past 18 months to $3.3tn.
“Soros’s war on the renminbi and the Hong Kong dollar cannot possibly succeed — about this there can be no doubt,” read a front-page opinion piece by a commerce ministry researcher in the overseas edition of the People’s Daily headlined “Declaring war on China’s currency? Ha ha”.
Last week the billionaire investor told Bloomberg TV he had bet against the S&P 500, Asian currencies and commodity-linked economies, while going long on US Treasuries.
Chinese officials and state media have moved aggressively to shore up confidence in the renminbi in recent weeks. The Chinese currency has fallen 5.7 per cent since the central bank shocked global markets in August by granting the renminbi additional flexibility to depreciate.
While Mr Soros mentioned neither the renminbi nor the Hong Kong dollar in his remarks last week, he did say China was the “root cause” of this year’s global bear market, citing deflation and excessive debt as key risks. He said a hard landing for the Chinese economy was “practically unavoidable”.
However, Mr Soros also indicated that China’s economic slowdown posed a greater short-term risk to other countries than to China itself, mainly because of China’s deflationary impact on global commodity prices. “China can manage it,” he said. “It has resources and greater latitude in policies, with $3tn in reserves.”
Mr Soros has been blamed for speculative attacks against Asian currencies during the 1997 Asian financial crisis and the British pound in 1992. He announced his retirement from financial investment at Davos last year but still serves as chairman of Soros Fund Management.
In an English-language editorial on Saturday, the official Xinhua news agency criticised “those who want to bet on the ‘ultimate failure’ of the Chinese economy”. The article further warned that “reckless speculations and vicious shorting will face higher trading costs and possibly severe legal consequences”.
That followed a Xinhua report this month citing experts advising that the “vast majority of [Chinese] households really don’t have need” to buy foreign currency. The attempt to ease renminbi selling pressure came after state media reported that foreign currency purchases by individuals had soared in recent weeks, prompting informal guidance from regulators instructing banks to limit such purchases.
As capital outflows have accelerated, the People’s Bank of China has spent hundreds of billions from its foreign exchange reserves to push back against depreciation.
Officials at China’s foreign exchange regulator have repeatedly said they see “no basis” for large renminbi depreciation, and a top adviser to President Xi Jinping told Davos last week that China was not seeking a weaker currency.