This essay examines the stance of the People’s Bank of China against currency speculation, contrasting it with Japanese media’s failure to investigate market manipulation and defend national interests.

February 15, 2016

The following is from page 5 of yesterday’s Nikkei newspaper.
As I wrote yesterday, China is not a simple great power. It is one of the permanent members of the United Nations Security Council and holds veto power.

That is precisely why most media outlets, led by the Asahi Shimbun, failed to report the reality of the Cultural Revolution.
With the sole exception of a Sankei Shimbun correspondent—who was expelled from China for doing so—not a single paper reported the truth. Instead, they beautified it.

I myself, as a reader of the Asahi Shimbun, remember believing at the time that the Cultural Revolution was something truly great.
From the radio came heroic slogans from Mao’s Little Red Book, such as, “The feathers of a crow cannot hide the brilliantly shining sun.”
Today, one would immediately think such broadcasts belonged to North Korea.
Before knowing the reality, I thought, “So this is Mao Zedong.”

Media led by the Asahi Shimbun must now learn from the following statement by the Governor of the People’s Bank of China what it truly means to defend a nation.
They must immediately investigate who continued massive short selling and disclose it to the Japanese people and the world.

Even media critical of China should learn from this resolve—to protect the nation from speculators—and investigate and report accordingly.

“Will Not Allow Speculators to Take the Lead”

People’s Bank Governor Warns Against Yuan Short Selling

(Beijing – Masahiro Ōkoshi)

Zhou Xiaochuan, Governor of the People’s Bank of China (the central bank), stated that “we will not allow speculators to dominate market sentiment,” warning international hedge funds believed to be betting on yuan depreciation.

Chinese magazine Caixin Weekly (online edition) reported the remarks in an interview by the 13th.

Although China was in the midst of the Lunar New Year holidays, the statement appeared aimed at stabilizing markets by signaling the central bank’s stance amid growing “China-originated” market turbulence.

Governor Zhou said that regarding the yuan exchange rate, China places emphasis on stability against a “basket of currencies” including the dollar, yen, and euro, adding that “as a result, fluctuations against the dollar may grow larger in the future.”

Markets have increasingly priced in expectations of yuan depreciation amid economic slowdown.
Recently, prominent U.S. investor George Soros stated that a “hard landing” of the Chinese economy is unavoidable, prompting Chinese authorities to remain vigilant against speculators betting on yuan weakness.

In response, Zhou pointed out that “China holds the world’s largest foreign exchange reserves,” suggesting that authorities retain ample room to support the currency through dollar-selling, yuan-buying intervention.

He also stated that “cross-border capital flows remain within a normal range, and there is no basis for prolonged yuan depreciation.”

While emphasizing continued reforms to enhance exchange rate flexibility, he added that such reforms would proceed “carefully, selecting appropriate timing so as not to disrupt international markets.”