Friday, China’s finance minister cancelled a meeting with his Japanese and South Korean counterparts on the sidelines of the Asian Development Bank’s annual conference in Yokohama. Xiao Jie left Japan for China to attend what Reuters termed an “emergency domestic meeting.”
The Reuters account, based on the comments of “a senior Japanese finance ministry official,” was confirmed by China’s Ministry of Finance. The Chinese ministry did not give any reason why Xiao had to return to China so suddenly. The Japanese official who spoke to Reuters did not know either.
At least one thing is clear. Xiao’s unexpected departure had nothing to do with ongoing tensions between Beijing and Tokyo. The trilateral discussion went forward on Friday with China represented by a deputy finance minister and a senior official from the People’s Bank of China, the central bank. Moreover, Xiao flew back to Japan Saturday for other commitments.
So what was Friday’s emergency in China? Andrew Collier of Orient Capital Research, a Hong Kong research outfit, tells me so far no news about the purpose of the Friday meeting has leaked out. “No murmurs out of Beijing” is how he put it on Saturday.
The absence of news, of course, has only fed speculation. Collier has two guesses for this “unusual” move. He thinks the PBOC, as the Chinese central bank is known, may be preparing “strong action” on either interest rates or the value of the renminbi.
At first glance, a sudden downward adjustment in the Chinese currency looks improbable because it has been remarkably stable against the dollar. April was the third straight month that CNY, the Chinese currency in the onshore market, has not moved more than 0.22% against the greenback.
Some, however, believe the lack of significant movement is not a good sign. The provocative ZeroHedge site thinks the current lack of volatility is “reminiscent” of the stability in the currency before the August 2015 deval. Bloomberg at the time noted that a gauge of volatility of the yuan had fallen to a one-year low in the month before that stunning event.
There is even darker speculation about Friday’s emergency meeting. Some think it had something to do with the tumble in commodity prices in China. ZeroHedge reported that “some desks” are guessing that “one or more Chinese financial institutions could be in trouble again, due to the latest commodity turmoil.”
By Gordon G. Chang