Discuss the following questions:

1. What do you think are the driving forces of the devaluations/depreciations of Yuan (against US dollars)?
2. Searchonlineand describe what happened to China?s stock markets during that period, especially in January 2016. (Information not provided in the three articles.) What do you think of the relation between the Yuan value changes and China?s stock market movements?
3. What were and will be the global impacts of the depreciation? If you prefer, feel free to pick a country or a region to discuss the impacts.
4. If you are a U.S. policy maker, how would you react to the China?s move?

1/8/2016 China Halts Run of Yuan Fixing Cuts That Rattled Global Markets Bloomberg Business Offshore currency little changed as regional markets advance Large onshoreoffshore gap breaches IMF rule, Macquarie says China ended an eightday run of reductions to the yuan's reference rate that sent shockwaves through financial markets and escalated fears of a global currency war. The People's Bank of China set the daily fixing, which restricts onshore moves to a maximum 2 percent on either side, at 6.5636 a dollar, 0.02 percent stronger than the previous day's reference rate. It was cut 1.42 percent over the last eight days. The yuan's weakness is threatening to spark a cycle of competitive devaluations, Mexican Finance Minister Luis Videgaray said after his nation's central bank spent $400 million supporting its currency on Thursday. The Standard & Poor's 500 Index had its worstever start to a year over the last four days and about $4 trillion was wiped from the value of global equities in that time. Stock trading in China was suspended on two of the last four days as sliding prices triggered circuit breakers. \"It's about time; the weak fix has really caused a lot of panic,\" said Roy Teo, a Singaporebased currency strategist at ABN Amro Bank NV, which Bloomberg data show had the mostaccurate forecasts for the yuan over the past year. "As much as there are economic reasons for a weaker exchange rate, I think the past few weak fixings have really caused a lot of uncertainty over whether they're seeking to devalue the currency.\" Yuan Strengthens The offshore yuan fell 0.03 percent to 6.6843 a dollar as of 4.03 p.m. in London, according to data compiled by Bloomberg. It sank as low as 6.7618 on Thursday, within 0.4 percent of a record 6.7850 seen in September 2010. The currency started trading in Hong Kong in the third quarter of 2010 and Bloomberg data goes back as far as August of that year. The onshore rate was little changed at 6.5938 in Shanghai on Friday. While Commerzbank AG had expected the PBOC fixing to be near Thursday's official close of 6.5939 in Shanghai, the rate was actually 0.5 percent stronger. If the central bank keeps \"spooking the market on the downside, equities and the currency will keep falling significantly and risk financial stability,\" Singaporebased economist Zhou Hao said before Friday's reference rate was announced. Assets Rally ht t p: / / www. bl oomber g . c om/ news / ar t i c l es / 2016 01 08/ of f s hor e yuan ext ends g ai ns as c hi na ends r un of f i xi ng c ut s 1/ 7 1/8/2016 China Halts Run of Yuan Fixing Cuts That Rattled Global Markets Bloomberg Business Asian stocks and currencies rallied earlier on Friday. The MSCI Emerging Markets Index climbed 0.1 percent, the most since Dec. 31, as Chinese shares advanced. A gauge of 20 developingnation exchange rates extended losses for a sixth day after betterthanestimated U.S. jobs data bolstered the case for an interestrate increase. Indian rupee, the Malaysian ringgit and South Korea's won strengthened. The PBOC has weakened its daily fixing by 2.6 percent since winning entry into the International Monetary Fund's reserves basket on Nov. 30. The offshore yuan's discount to the onshore rate reached a record 2.9 percent on Thursday and was last at 1.4 percent. The offshore yuan's recent slide put China effectively in breach of IMF regulations, which stipulates that no member country can operate multiple currency practices that result in spreads of more than 2 percent, Macquarie Bank Ltd. strategists led by Singaporebased Nizam Idris wrote in a report. The lender cut its onemonth forecast for the onshore yuan to 6.70 a dollar from 6.43. 'Grace Period' \"There will be a grace period surely applied for the spread to be allowed to contract again and tighten,\" said Gareth Berry, a foreignexchange strategist at Macquarie in Singapore. \"A problem would arise if there was a persistent breach. It was a technical breach." An IMF spokeswoman in Hong Kong declined to comment while an email to the bank's Beijing office didn't receive a reply. Government data next week are forecast to show Chinese exports shrank for a sixth straight month in December, according to the median estimate in a Bloomberg survey of economists. A gauge of China's services output fell to a 17month low in December, according to a report released Wednesday. New Index In December, China set up an index comparing the yuan against a basket of 13 currencies, saying that it isn't right to measure performance against the dollar alone. The yuan has \"limited\" room for further depreciation as slumping energy prices will help boost the currentaccount surplus in China, the world's secondlargest importer of oil, and offset capital outflows, according to a Goldman Sachs Group Inc. report this week. The nation's foreignexchange reserves slid more than forecast in December, capping their firstever annual decline, as authorities sought to prop up a weakening yuan. "Today's fixing will stabilize sentiment and keep the yuan stable against a basket of currencies," said Tommy Xie, a Singaporebased economist at OverseaChinese Banking Corp. "The risk of the unknown still persists but it has improved a lot. The trend for the yuan to depreciate hasn't changed, considering the fundamentals, but the PBOC's ht t p: / / www. bl oomber g . c om/ news / ar t i c l es / 2016 01 08/ of f s hor e yuan ext ends g ai ns as c hi na ends r un of f i xi ng c ut s 2/ 7 1/8/2016 China Halts Run of Yuan Fixing Cuts That Rattled Global Markets Bloomberg Business improved a lot. The trend for the yuan to depreciate hasn't changed, considering the fundamentals, but the PBOC's policy stance is clearer." While China has extended onshore yuan trading hours to 11:30 p.m., the central bank said last month that it would continue to view the 4:30 p.m. price as the closing level. This is significant because the monetary authority's system of setting the yuan's daily fixing uses the previous day's close as one of the factors. More Volatility Investors should expect more volatility in Chinese markets as the government attempts to shift away from a planned economy to one driven by market forces, Mark Mobius, chairman of the emerging markets group at Franklin Templeton Investments, wrote in a blog post on Thursday. Policy makers face a \"conundrum\" as they seek to maintain financial stability while at the same time loosening their grip on markets, he said. \"Today's move is a reflection that the authorities want some stabilization and again aligns with the view that China doesn't like onewaybets,\" said Christy Tan, head of markets strategy at National Australia Bank Ltd. in Hong Kong. "China doesn't have a weak yuan foreignexchange policy. It is allowing the currency to trade in a more flexible, marketoriented manner. This will imply room for further weakness in the near term." Before it's here, it's on the Bloomberg Terminal. Yuan China Currency Singapore ht t p: / / www. bl oomber g . c om/ news / ar t i c l es / 2016 01 08/ of f s hor e yuan ext ends g ai ns as c hi na ends r un of f i xi ng c ut s 3/ 7 1/8/2016 China Halts Run of Yuan Fixing Cuts That Rattled Global Markets Bloomberg Business Aramco may be worth anywhere from $1 trillion to $10 trillion Even a small stake sale could surpass largestever offerings When one financial adviser heard about Saudi Arabia's plans to list a company larger than the economies of most nations, he had to pull over his car because he was laughing so hard. Saudi Arabian Oil Co., or Aramco, the world's largest oil producer, said Friday it's considering an initial public offering. It confirmed an interview with Deputy Crown Prince Mohammad bin Salman published in the Economist Thursday. The news was greeted with incredulity in the financial industry, according to interviews with a half dozen bankers who do business in the Middle East. They asked not to be identified to protect their business interests. An excerpt of the news release issued by Saudi Aramco. For one thing, Aramco's inner workings are opaque, making its true value a mystery. Then there's the timing. The price of crude oil is near its lowest level in more than a decade. Discussions with Aramco about selling assets in the past had been about much smaller parts of the business, five of the people said. An initial public offering of the entire enterprise had only ever been discussed as a joke, one of the people said. The company could be worth anything from $1 trillion to upwards of $10 trillion, which would make it the most ht t p: / / www. bl oomber g . c om/ news / ar t i c l es / 2016 01 08/ of f s hor e yuan ext ends g ai ns as c hi na ends r un of f i xi ng c ut s 4/ 7 1/8/2016 China Halts Run of Yuan Fixing Cuts That Rattled Global Markets Bloomberg Business valuable company in the world, according to a note from Jason Tuvey at research firm Capital Economics. The last mega IPO from the oil industry was a decade ago, when Russia's OAO Rosneft raised more than $10 billion. Even if Saudi Arabia sells a small stake, a listing could easily surpass that of Alibaba Group Holding Ltd. whose $25 billion IPO is the largest on record. Still, Aramco is unlikely to list on the biggest exchanges, according to Bloomberg oil strategist Julian Lee. That would require the government to give investors more detailed information about Aramco's reserves and production capacity, something oilproducing nations consider state secrets, he said. Aramco is considering selling an \"appropriate percentage\" of its shares in the capital markets or listing a bundle of its subsidiaries, it said in the statement. Frantic Calls Saudi Arabia typically sells stakes in stateowned companies to the public at below market value as part of its efforts to redistribute wealth. National Commercial Bank raised $6 billion in 2014 in the Middle East's largest share sale. As the bankers do the sums, a big IPO won't necessarily translate into big fees. Governments often pay low fees on their exits. The bankers, lawyers and accountants split 25 million Saudi riyals ($6.65 million) for National Commercial Bank's IPO, about 0.1 percent of the deal size. That compared with average listing fees for bankers alone of 2.7 percent in Europe, the Middle East and Africa in 2014, according to data compiled by Bloomberg. Facing the possibility of a recordbreaking IPO, bankers are fielding frantic phone calls from head offices asking why they didn't know this was coming and are preparing to spend the weekend figuring out how serious Salman is, two of the people said. (An earlier version of this story corrected the fee percentage paid for National Commercial Bank's IPO.) ht t p: / / www. bl oomber g . c om/ news / ar t i c l es / 2016 01 08/ of f s hor e yuan ext ends g ai ns as c hi na ends r un of f i xi ng c ut s 5/ 7 1/8/2016 Currency must fall another 14% to spur 0.7 points of growth Risk is that debasing the yuan can lead to capital outflows The yuan, which has fallen 5 percent since China's central bank devalued the currency in August, probably needs to fall an additional 14 percent if the nation's economy is to see any real benefits. A decline to 7.7 per dollar, from about 6.6, is needed to boost gross domestic product expansion by 0.7 percentage point, according to estimates by Bloomberg Intelligence Economics. The move, a scenario which none of the analysts in Bloomberg surveys expects, would lead to $670 billion in capital outflows. The trick for Chinese officials is to manage the currency lower without sparking a mass exodus of capital from the country. The drop in China's exports is mainly the result of sluggish global demand, and the collapse of the yuan would only increase the risk of competitive devaluations in neighboring countries creating a socalled currency war. \"They don't want an excessive devaluation,\" said Sacha Tihanyi, senior emergingmarkets strategist at Toronto Dominion Bank in New York. \"I don't think they're trying to achieve some kind of export advantage through currency devaluation.\" The yuan slid to a fiveyear low of 6.5956 per dollar in Shanghai on Thursday after the central bank cut the fixing, extending its decline over the past year to 5.7 percent. The People's Bank of China halted an eightday run of cuts to its reference rate for the currency on Friday, leaving the offshore exchange rate little changed at 6.6840 per dollar as of 6:46 a.m. New York time. The gap with the onshore level was at 1.4 percent. It widened to a record 2.9 percent on Thursday before ht t p: / / www. bl oomber g . c om/ news / ar t i c l es / 2016 01 08/ yuan s een needi ng bi g g er depr ec i at i on f or c hi na t o r eap benef i t s 1/ 7 1/8/2016 Yuan Seen Needing Bigger Depreciation for China to Reap Benefits Bloomberg Business tightening amid suspected intervention. Exports Decline China's exports fell for a fifth month in November, the customs administration said at the end of last year. Gross domestic product growth will slow from 6.9 percent in 2015 to 6.5 percent this year, according to a Bloomberg survey. To lift export growth by 10 percent this year would require a 13 percent drop in the yuan on a tradeweighted basis, the historical relationship between the two suggests, according to Bloomberg Intelligence analysts Fielding Chen and Tom Orlik. That implies that the yuan needs to decline to about 7.7 per dollar, which would be the lowest since 2007. Option traders assigned a 13 percent probability of reaching it this year. Only one analyst among 64 surveyed by Bloomberg expects the yuan to weaken beyond 7 per dollar this year. Analysts at Rabobank Group of the Netherlands are the most bearish, predicting the yuan will weaken to 7.6 per dollar by the end of December. That compares with the median forecast of 6.65 per dollar. Mixed Signals The People's Bank of China has sent mixed signals about the goals of its currency policy. The authorities have repeatedly pledged to keep the yuan stable, drawing down a record $513 billion from foreign reserves last year to shore up the exchange rate. At the same time, the PBOC set its reference rate at unexpectedly weak levels this week, raising speculation that it's become more tolerant of depreciation and rattling global markets. Analysts at JPMorgan Chase & Co. lowered their yearend yuan forecasts Thursday to 6.9 per dollar, from 6.7, saying the weaker fixings were a \"clear confirmation of a shift in the mindset of Chinese authorities\" in favor of a weaker yuan versus the dollar. Economic Improvements The currency decline is at odds with recent signs of economic stability. Monthly indicators due Jan. 19 are poised to show continued gains in retail sales, and some acceleration in industrial output from November to December, according to Goldman Sachs Group Inc. Evidence also indicates that house prices are steadying, metals prices have picked up from historical lows and demand for credit is reemerging. While exports are slowing, they're more or less in line with other nations as global trade stagnates. Overseas shipment in China fell 6.8 percent in November, compared with a 6.3 percent drop in Taiwan and a 4.8 percent decline in South Korea. If anything, Chinese exporters are edging out their competitors, hardly a sign of currency overvaluation. The ht t p: / / www. bl oomber g . c om/ news / ar t i c l es / 2016 01 08/ yuan s een needi ng bi g g er depr ec i at i on f or c hi na t o r eap benef i t s 2/ 7 1/8/2016 Yuan Seen Needing Bigger Depreciation for China to Reap Benefits Bloomberg Business If anything, Chinese exporters are edging out their competitors, hardly a sign of currency overvaluation. The country's share of global exports surged to about 14 percent in July, from 8.7 percent in January 2010, according to data compiled by Bloomberg. Further depreciation fuels expectations of more weakness and capital outflows, according to Chris Turner, Londonbased head of currency strategy at ING Groep NV. Outflows amounted to almost $1 trillion in the year through November, according to Bloomberg data. \"The PBOC want to keep it 'basically stable' against a basket of currencies,\" said Turner. Losing control of the yuan \"could trigger more capital outflows\" and that would be their main concern, he said. Before it's here, it's on the Bloomberg Terminal. Read this next Philippine Peso Declines the Least in Emerging Asia This Week China State Funds Said to Buy More Shares After Market Rout China Halts Run of Yuan Fixing Cuts That Rattled Global Markets Yuan China Currency Exports ht t p: / / www. bl oomber g . c om/ news / ar t i c l es / 2016 01 08/ yuan s een needi ng bi g g er depr ec i at i on f or c hi na t o r eap benef i t s 3/ 7 1/8/2016 Yuan Seen Needing Bigger Depreciation for China to Reap Benefits Bloomberg Business Aramco may be worth anywhere from $1 trillion to $10 trillion Even a small stake sale could surpass largestever offerings When one financial adviser heard about Saudi Arabia's plans to list a company larger than the economies of most nations, he had to pull over his car because he was laughing so hard. Saudi Arabian Oil Co., or Aramco, the world's largest oil producer, said Friday it's considering an initial public offering. It confirmed an interview with Deputy Crown Prince Mohammad bin Salman published in the Economist Thursday. The news was greeted with incredulity in the financial industry, according to interviews with a half dozen bankers who do business in the Middle East. They asked not to be identified to protect their business interests. An excerpt of the news release issued by Saudi Aramco. For one thing, Aramco's inner workings are opaque, making its true value a mystery. Then there's the timing. The price of crude oil is near its lowest level in more than a decade. Discussions with Aramco about selling assets in the past had been about much smaller parts of the business, five of the people said. An initial public offering of the entire enterprise had only ever been discussed as a joke, one of the people said. ht t p: / / www. bl oomber g . c om/ news / ar t i c l es / 2016 01 08/ yuan s een needi ng bi g g er depr ec i at i on f or c hi na t o r eap benef i t s 4/ 7 1/8/2016 Yuan Seen Needing Bigger Depreciation for China to Reap Benefits Bloomberg Business The company could be worth anything from $1 trillion to upwards of $10 trillion, which would make it the most valuable company in the world, according to a note from Jason Tuvey at research firm Capital Economics. The last mega IPO from the oil industry was a decade ago, when Russia's OAO Rosneft raised more than $10 billion. Even if Saudi Arabia sells a small stake, a listing could easily surpass that of Alibaba Group Holding Ltd. whose $25 billion IPO is the largest on record. Still, Aramco is unlikely to list on the biggest exchanges, according to Bloomberg oil strategist Julian Lee. That would require the government to give investors more detailed information about Aramco's reserves and production capacity, something oilproducing nations consider state secrets, he said. Aramco is considering selling an \"appropriate percentage\" of its shares in the capital markets or listing a bundle of its subsidiaries, it said in the statement. Frantic Calls Saudi Arabia typically sells stakes in stateowned companies to the public at below market value as part of its efforts to redistribute wealth. National Commercial Bank raised $6 billion in 2014 in the Middle East's largest share sale. As the bankers do the sums, a big IPO won't necessarily translate into big fees. Governments often pay low fees on their exits. The bankers, lawyers and accountants split 25 million Saudi riyals ($6.65 million) for National Commercial Bank's IPO, about 0.1 percent of the deal size. That compared with average listing fees for bankers alone of 2.7 percent in Europe, the Middle East and Africa in 2014, according to data compiled by Bloomberg. Facing the possibility of a recordbreaking IPO, bankers are fielding frantic phone calls from head offices asking why they didn't know this was coming and are preparing to spend the weekend figuring out how serious Salman is, two of the people said. (An earlier version of this story corrected the fee percentage paid for National Commercial Bank's IPO.) ht t p: / / www. bl oomber g . c om/ news / ar t i c l es / 2016 01 08/ yuan s een needi ng bi g g er depr ec i at i on f or c hi na t o r eap benef i t s 5/ 7