For some time now, China has been selling off their foreign currency, their US Bonds, and buying gold in historic quantities. The reason for the moves is twofold; to bolster the Shanghai Composite Index and to weaken the yuan in order to increase exports. Somehow today, it all went wrong.
The trading session finished down 6.4%, the worst drop in a month and 47% down since last summer. On top of that 960 billion in short-term loans to commercial banks by China's central bank are set to mature this week. As evidenced in Japan earlier this week, a major life insurance company, Zhongrong Life Insurance, was banned by the Bank of China from adding stock investments due to solvency risks, according to The Wall Street Journal. A vote of no confidence by BOC in it's own economy?
All this, adds WSJ, a day before the G-20 meets in Shanghai to address global anxiety over the Chinese economy and financial markets. This is the same day the US and China announced an agreement to sanction North Korea. A major change of China's position on a matter than has been an on-going point of contention between the two nations. Keep in mind the US plays a key role in the G-20.
The implications of a single day's events are a matter of amazing synchronicity.
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