The big easy
China’s central bank said Wednesday that it would lower reserve requirements for 20 rural cooperatives, feeding speculation that the era of tight monetary policy is over – or rather, that the end is about to begin. Suits from Wall Street to Jingrong Jie are praying that the market will take encouragement from reserve requirements cuts that are likely to follow in the months ahead. Beijing has less room to spend than the first time we all went down the mountain; with inflation only just subsiding and concerns about bank loan quality mounting, it will have to milk all the market confidence it can out of some RRR cuts. That may not be the most gripping of topics, but Beijing is better suited than most to holding a crowd. Just look at renminbi appreciation, which Andy Xie has called “a striptease that can go on forever.” And China’s current generation of leaders certainly have the patience to do one extended disrobing. Beijing is often protected from censure because the rest of us get distracted by shiny objects before we can figure out what they’re really doing; their favorite catch phrases appear to be “fine-tuning,” “gradual” and “Where did I put my tiny screwdriver?” But over the past month, they have begun to gradually sop up liquidity through open-market … ooh shiny.
This week on “The Wild East”
The Wild East: a forgotten land of no law, no rules, no order. Notorious gunslinger Carson Block and his Muddy Waters posse have a new target, the n’er-do-well Focus Media. An opening ambush, and Focus Media is hurt real bad. Pasty-faced bankers at Goldman and BofA hit the floor, reaching for inhalers and paper bags. But everybody knows Focus Media’s a lot bigger and badder than the Sino-Forest monster from last episode. A return volley, and suddenly the tide turns. Who will think of the innocent investors trapped in the crossfire? WHO? In steps Sherriff Chuck Schumer. You might remember him as the outrageously sexy anti-hero dogged by his troubled past from A Fistful of Yuan. Well, he’s back to kick some auditing ass. “I respectfully urge the [US audit regulators] to take immediate disciplinary actions against Chinese audit firms,” he growls, adding that a good spanking might do the trick.
Good stuff, right? Overall we at CER liked this episode, but a couple things prevented it from really taking off. The part where the dinosaur-proof bank stress test fences prove faulty and Jim Chanos enters the compound seemed repetitive and clichéd. The religious conversion sub-plot, where Chinese officials preach on about environmental protection was weird and unconvincing, especially after that previous Copenhagen episode. But big thumbs up to the manufacturing slow-down cliffhanger – can’t wait to find out what happens next week!