Is China really devaluing its currency?

China's foreign exchange reserves have fallen from a gigantic $4 trillion in the first half of 2014 to around $3.2 trillion today Photo: Reuters

By Mehreen Khan in The Telegraph

What's happened to the renminbi?

Since the summer, investors have been keeping an uneasy eye on the value of the Chinese currency.

In August, Beijing decided to tweak its exchange rate peg with the dollar, making the renminbi float in a wider band against the greenback.

This sparked immediate market panic that China was entering into the world's currency wars.

But the devaluation in itself was small. Allaying fears further, the Chinese began to immediately intervene to prop up the RMB to stop it falling too fast by drawing down their reserves.

But devaluation fears are returning. The country's export performance has stuttered, while the dollar has rocketed on the back of a stronger US economy.

In response, on January 7, authorities set their "daily fix" against the dollar 0.51pc lower. This was the single biggest move since August and set off a new bout of mass stock market hysteria.

Overall, the RMB has weakened by around 10pc against the dollar over the last two years.

"Over half of the weakness has come in the last four months," says Sean Yokota at SEB.

"We are heading to 6.83; the level China pegged to the dollar post the global financial crisis of 2008."

Kevin Lai at Daiwa Capital expects the RMB to fall even further. He forecasts it will hit 7.50 by the end of the year.

"There is likely still to be plenty of depreciation to come," he said.

Does it really matter?

China has said it is not in the business of competitive currency devaluation.

The central bank, The People's Bank of China (PBOC), has said its main exchange rate target is against a broader basket of currencies and it's not fixated on the greenback.

The PBOC has repeated this claim again, saying that it is happy to let the yuan-to-dollar rate have a more "market determined value".

It wants to ensure that when measured against a wider basket of currencies - which includes sterling and the yen - the RMB remains "stable."

What's happened to the trade weighted value?

In worrying signs for the Politburo, the RMB's weakness is being reflected across the board - and not just against the dollar.

The chart below shows how the exchange rate against a basket of currencies has broadly tracked the dollar rate since the start of last summer.

Are the Chinese losing control?

Beijing has been intervening heavily to support its currency and latest evidence suggests it has been drawing down on its reserves on a massive scale.

The latest December figures show reserves fell by a record $108bn. Such steep falls are also evidence of worsening capital flight in the country.

Net outflows reached $140bn last month, surpassing the previous peak seen in August, says Mark Williams, at Capital Economics.

The Communist party has responded to mass capital outflows by using the full force of the state to punish those it accuses of "illegal cash transfers" out of the country.

Some claim that the Chinese are beginning to lose control over their exchange rate and their economic policy.

Burning through reserves exerts a tightening effect on the economy. This has been offset in the past by cutting interest rates. However, rate cuts only hasten capital outflows and so the vicious cycle continues.

China's exchange rate policy, it could be said, has put the country in a bind.

Hashim Amla did the honourable thing by jettisoning his burden

Mike Selvey in The Guardian

It may be unusual to change captains at the midpoint of a series but Hashim Amla has chosen a good moment to concede his position and drop back into the ranks. A resignation after the massive defeat in Durban would have represented capitulation even if he had been contemplating it for a while.

Now though he has done so on the back of a stirring fightback from the side he led, and an emphatic return not so much to form (he had not looked out of touch in the second innings in Durban) as to relentless run-gathering. It is a little too strong to describe the outcome of a Test that had yet to complete its third innings as a “winning draw” for South Africa. With the conditions finally giving the bowlers some lateral movement on the final day, we can only surmise what the England bowlers might have managed had they been defending, say, 200 and their colleagues rediscovered the art of catching but at least we know there will be an almighty scrap now up on the highveld.

Hashim Amla resigns as captain of South Africa after drawn second Test

 

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Sometimes it is only in the aftermath of such a decision that the extent of the burden is revealed. Those who were there in the dining room at Edgbaston remember the red eyes of Nasser Hussain, that most passionate of England captains. There were Michael Vaughan’s tears at the ECB centre of excellence at Loughborough. Such is the responsibility, beyond simply a job, that comes with captaining one’s country or even just playing. It is only around nine months since Jonathan Trott, a man whose implacable demeanour hid inner turmoil, was lbw in what was to prove his final innings for England. He positively skipped from the field and sprinted up the pavilion steps, a man clearly content it was finally over. So there should be no surprise that in Amla’s case, he conducted a press conference that was a long way from the soul-searching of others and simply that of a man happy in the decision at which he had arrived and itching to get on with the job at which he truly excels.

There is absolutely no question of Amla being coerced into applying for the job in the first place on account of his ethnicity. With Graeme Smith’s retirement, he, as a senior player, put his name forward with others, including AB de Villiers. He did so because he believed he could make a difference, and after due process, was installed. It would also be wrong though to assume that, all things being equal, this was not the choice that would be made, convenient for South African cricket that he had applied.

It would also be erroneous to deduce that after the strong rumours in Durban that things were in some disarray on and off the field that he had been pushed out of the job. There was some fierce external criticism, most prominently from Smith in his role as media pundit, to which the response of Cricket South Africa was to invite him into the camp. But Smith’s remarks, while trenchant, would surely have been taken on board by Amla, a trusted colleague in Smith’s teams: there is a difference between being pushed and being encouraged.

A decade ago, when England were in India, I went to stay with their then coachGreg Chappell, and conducted an interview with him, which in part resonates now with the situation in which Amla found himself. At the time, Chappell had been dividing opinion in the country because of his fractious relationship with the former captain Sourav Ganguly, who had been struggling desperately for batting form with one Test hundred, in Bulawayo, in two-and-a-half years. He had been replaced as the captain by Rahul Dravid and the coach was portrayed as the man who sacked him, which was far from the truth.

“We clashed,” Chappell told me, “because his needs as a struggling player and captain and those of the team were different. I’m not the hard-nosed control freak that I have been portrayed. I’m thorough, a realist, a pragmatist and I’m honest. Much has been written and said, a lot of it misleading, but in essence I told Sourav that if he wanted to save his career he should consider giving up the captaincy. He was just hanging in there. Modest innings were draining him. He had no energy to give to the team, which was helping neither him nor us. It was in his own interest to give himself mind space to work on his batting so that it could be resurrected.”

Here we have in Ganguly and Amla two captains at opposite ends of the spectrum: the one desperate to hang on to his position at all costs; the other understanding his leadership may not be in the best interests either of the side or himself. Serene and understated, Amla had taken over a side who were in inevitable transition after the loss of some of the greatest players the game has seen. So a downturn in performance was not entirely unexpected. But he has nonetheless presided over the longest winless streak, eight matches, in South Africa’s Test history, mitigation coming only in the state of the Bangladesh weather and the pitches in India. Certainly in this, Amla has seen the broader picture.

Where they share a common theme is the impact, as Chappell said of Ganguly, that it was having on his batting and the team. Until his redemptive double hundred in Cape Town, Amla’s previous 13 matches as captain had brought him an average of 40.76 against a career average 10 points or so higher. Since the start of the tour of India that preceded the current series, nine innings had brought him five single figure scores and a top score of 43.

Whether, like Ganguly, his tribulations with the bat were impacting on the team in a manner other than simply the lack of runs is doubtful. If the captaincy itself, and all that it entailed, was affecting the capacity to do the job at which he truly excelled, then Amla is understanding enough to be able to arrive at the conclusion he has. It is an honourable thing to have done, which may well be to the detriment of England. That he has been able to do so on the back of a momentous innings, played perhaps with the release that comes with already having made a decision, merely serves to highlight it.

By the end of my first year as a doctor, I was ready to kill myself

An Anonymous junior doctor in The Guardian


On my morning drives to the hospital, the tears fell like rain. The prospect of the next 14 hours – 8am to 10pm with not a second’s respite from the nurses’ bleeps, or the overwhelming needs of too many sick patients – was almost too much to bear. But on the late-night trips back home, I’d feel nothing at all. Deadbeat, punch-drunk, it was utter indifference that nearly killed me. Every night, on an empty dual carriageway, I had to fight with myself to keep my hands on the steering wheel. The temptation to let go – of the wheel, the patients, my miserable life – was almost irresistible. Then I’d never have to haul myself through another unfeasible day at the hospital.


By the time I neared the end of my first year as a doctor, I’d chosen the spot where I intended to kill myself. I’d bought everything I needed to do it. All my youthful enthusiasm for healing, big dreams of saving lives and of making a difference, had soured and I felt an astronomic emptiness. Made monumentally selfish by depression, I’d ceased even to care what my husband would think of me, or that my little boy would grow up without his mother.


Doctor suicide is the medical profession’s grubby little secret. Female doctors aretwice as likely as the general population to take our own lives. A US study shows our suicide rate appears higher than that of other professional groups, with young doctors at the beginning of their training being particularly vulnerable. As I wrestled silently with the urge to kill myself, another house officer in my trust went right on and did it. To me, that monstrous waste of young life seemed entirely logical. The constant, haunting fear of hurting my patients, coupled with relentless rotas at work, had rendered me incapable of reason.


Though we know large numbers of doctors kill themselves, what is less clear are the reasons why, when dedicated to preserving human life, some doctors silently plot their own deaths. A 2006 study at the University of Pennsylvania identified that during their first year as doctors, young physicians experienced skyrocketing rates of burnout, with symptoms of emotional exhaustion, depersonalisation, and reduced sense of personal accomplishment soaring from 4% to 55%.


For me, the explanation ran deeper. I was entrenched in a hospital system that brutalised young doctors. Working on my hospital’s surgical emergency unit, there were simply too few of us to cope with the daily onslaught of patients. Officially eight or 10-hour days ran routinely into 13, 14 or 15 hours as we house officers worked at fever pitch to provide what was, at best, a mediocre service for our patients. Run ragged, we fought to keep our patients safe, but their numbers outstripped ours 20 or 30 to one, and the efforts this took were superhuman. The nurses knew, the consultants knew, even the hospital management knew, yet no one seemed to give a damn.

It wasn’t just exhaustion that drove me into depression. Plenty of jobs are busy. But there is something uniquely traumatic about being responsible for patients’ lives, while being crushed under a workload so punitive it gives neither the time nor space for safe assessment of those patients. Days were bad enough, but nights on call were terrifying. I remember running from the bed of one patient, still haemorrhaging blood from her surgical wound, to another whose heart rate had plummeted to 20, perilously close to a cardiac arrest. Two stricken patients, but only one doctor, wracked with the knowledge that if something went wrong, the guilt would be hers alone.


I was lucky. I was pushed by the colleague in whom I finally confided into seeking professional help. It took anti-depressants, therapy and a narrowly-avoided psychiatric inpatient admission to bring me back to the land of the living.




 Now, on the cusp of junior doctors’ first national strike in 40 years, I’m astounded the health secretary persists in ignoring unanimous condemnation of his new contract from juniors and medical leaders alike. If he gets his way, Jeremy Hunt will make it easier for hospitals to abuse their juniors, by stripping away the safeguards that stop hospitals overworking us, fining those that do. Under his new contract, our hours will become even longer, even more antisocial – at a time when we simply have nothing more to give. And as we are pushed to treat more and more patients, faster and faster, fatigue and psychological distress will dull our competence: your lives will be less safe in our hands. And our own? Take it from someone who’s been there. Watch the suicide rate climb.

Prohibition, Discrimination in Kerala's alcohol policy

Suhrith Parthasarathy in The Hindu

Regardless of what our respective moral positions on policies of prohibition might be, and regardless of the potential efficacy of such programmes, the judgment on the validity of Kerala’s liquor policy militates against the fundamental promise of equal concern and treatment under the Constitution.

As virtually its last significant act of 2015, on December 29, the Supreme Court of India delivered its judgment on the validity of Kerala’s newest liquor policy, which seeks to prohibit the sale and service of alcohol in all public places, save bars and restaurants in five-star hotels. Regardless of what our respective moral positions on policies of prohibition might be, and regardless of the potential efficacy of such programmes, the new law, as is only plainly evident, militates against the fundamental promise of equal concern and treatment under the Constitution. In placing five-star hotels on a pedestal, the law takes a classist position, and commits a patent discrimination that is really an affront to the underlying principles of our democracy. Regrettably, though, the Supreme Court’s judgment, in The Kerala Bar Hotels Association v. State of Kerala, eschews even the most basic doctrines of constitutionalism, and, in so doing, allows the state to perpetrate a politics of hypocrisy.

Kicking off the excise policy

Since 2007, the Kerala government has sought to tighten its Abkari (excise) policy with a view to making liquor less freely available in the State, ostensibly in the interest of public health. At first, the State sought to amend the policy by permitting new bar licences to be granted only to those hotels that were accorded a rating of three stars or more by the Central government’s Ministry of Tourism. In 2011, these rules were further changed. This time, all hotels that had a rating of anything below four stars were disentitled from having a licence issued to serve alcoholic beverages on their premises. However, those hotels with existing licences were accorded an amnesty, which permitted them to have their licences renewed even if they did not possess a four-star mark.

The Supreme Court held, in a convoluted judgment, in March 2014, that the deletion of three-star hotels from the category of hotels eligible for a liquor licence was, in fact, constitutionally valid. The court provided a rather bizarre rationale for what appeared to be a palpable act of favouritism. Even hotels without a bar licence, it said, were entitled to three-star statuses under the Ministry of Tourism’s rules and regulations.

In August 2014, the Kerala government sought to further intensify its Abkari policy, by making its most drastic change yet, in purportedly trying to enforce complete prohibition. Only hotels classed as five star and above, by the Union government’s Ministry of Tourism, the new policy commanded, would be entitled to maintain a bar licence. To give effect to this rule, the Abkari Act, a pre-constitutional enactment that was extended in 1967 to Kerala, was duly amended, and the State’s excise commissioners issued notices to all hotels of four stars and below, which served liquor, intimating them of the annulment of their respective bar licences.

The new policy was immediately challenged in a series of petitions filed in the Kerala High Court by hotels of various different denominations. In May last year, after a division bench of the High Court had ruled in favour of the State, the hotels filed appeals before the Supreme Court. They raised two primary grounds of challenge, both predicated on fundamental rights guaranteed under Part III of India’s Constitution.

Fundamental rights

First, the hotels submitted that in cancelling their bar licences, and in prohibiting them from serving and selling liquor on their premises, the State had infracted their right, under Article 19(1)(g), to practise any profession, or to carry on any occupation, trade or business. Second, they pleaded, in separately categorising hotels of five stars or more, and in permitting those hotels alone to serve liquor in public, the new Abkari policy had made an unreasonable classification, by treating persons on an equal standing unequally, and therefore violated Article 14 of the Constitution.

The first argument was admittedly going to be a difficult one to maintain. The liberty to freely carry on any trade or business is subject to reasonable restrictions that may be imposed by the state in the interest of the general public. The Constitution itself, in Article 47, requires States to make an endeavour towards improving public health, including by bringing about prohibition of the consumption of liquor. Therefore, quite naturally, any policy in purported furtherance of such goals would almost always be viewed as a legitimate limitation on any freedom to do business. In fact, in 1994, a constitution bench of the Supreme Court, in Khoday Distilleries Ltd. v. State of Karnataka, explicitly questioned whether any right to trade in alcoholic beverages even flowed from our Constitution.

“The State can prohibit completely the trade or business in potable liquor since liquor as beverage is res extra commercium,” wrote Justice P.B. Sawant. “The State may also create a monopoly in itself for trade or business in such liquor. The State can further place restrictions and limitations on such trade or business which may be in nature different from those on trade or business in articles res commercium.” Therefore, the court, in The Kerala Bar Hotels Association case, perhaps, had little choice but to hold the Abkari policy as being in conformity with the right under Article 19(1)(g).

Such a holding, though, ought not to have precluded the court from scrutinising the liquor policy with further rigour. The mere fact that a commodity is res extra commercium — a thing outside commerce — does not give the state absolute power to make laws on the subject in violation of the guarantee of equal treatment. While a law might represent a valid constraint on the freedom to trade, it nonetheless must confirm to other constitutional commands, including Article 14, which assures us that the state shall not deny to any person equality before the law or the equal protection of the laws within the territory of India.

The point of classification

Equality, as the legal philosopher Ronald Dworkin once wrote, is a contested concept. But it is however, in its abstract form, a solemn constitutional pledge that underpins our democracy. The Supreme Court, in some of its earliest decisions, interpreted Article 14 as forbidding altogether any law that seeks to make distinctions based on class, except where reasonable classifications are made in a manner that does no violence to the provision’s core promise. The court also crystallised a basic two-prong test to determine what constitutes such a classification: there must be, it held, an intelligible differentia, which distinguishes persons or things that are grouped together from others left out of the group, and this differentia must have a rational relation to the object sought to be achieved by the law in question.

Hence, in determining whether Kerala’s Abkari policy violated the right to equality, the question was rather simple: has the State made a reasonable classification in consonance with Article 14 by permitting only five-star hotels and above to serve liquor? When we apply the test previously laid down by the Supreme Court, there is little doubt that the distinction that the policy makes between hotels on the basis of their relative offering of luxuries constitutes a discernible intelligible differentia between two classes of things. But a proper defence of the law also requires the government to additionally show us how this classification of five-star hotels as a separate category bears a sensible nexus with the object of the law at hand. The changes in the liquor policy were ostensibly brought through with the view of promoting prohibition, and thereby improving the standard of public health in the State. Now, ask yourself this: how can this special treatment of five-star hotels possibly help the Kerala government in achieving these objectives?

The Supreme Court, as it happened, made no concerted effort to answer this question. This could be because, however hard we might want to try, it’s difficult to find any cogent connection between classifying five-star hotels separately and the aim of achieving prohibition. The court, therefore simply said, “There can be no gainsaying that the prices/tariff of alcohol in Five Star hotels is usually prohibitively high, which acts as a deterrent to individuals going in for binge or even casual drinking. There is also little scope for cavil that the guests in Five Star hotels are of a mature age; they do not visit these hotels with the sole purpose of consuming alcohol.” Given the palpable inadequacies of such a justification — and also given its validation of a manifestly classist position — the court also used the State government’s excuse of tourism as a further ruse to defend the law. But when a policy exists to promote the prohibition of the consumption of liquor, it’s specious to use an extraneous consideration, in this case, tourism, to defend a classification made in the law, regardless of how intelligible such a classification might be.

Prohibition often has a polarising effect on the polity. But the criticisms of the ineffectuality of such policies apart, Kerala’s new law ought to have been seen for what it is: paternalism, at its best, and, at its worst, an extension of an ingrained form of classism that is demonstrably opposed to the guarantee of equality under our Constitution. The judgment in The Kerala Bar Hotels Association case is therefore deeply unsatisfactory, and requires reconsideration.