Will the RMB become a basket case?

The festival season is upon us and the one blessing that every Indian will pray for is a collapse of both Pakistan and China, so that they can no longer threaten our peace. On 1 October, the International Monetary Fund included the Chinese currency, the renminbi, or RMB, in its basket of currencies that make up the Special Drawing Rights. The RMB, is the fifth currency, after the US dollar, the Euro, Japanese yen and the British pound, to be included in the SDR basket. Why was the RMB included in the basket? A currency is included if the country is a top exporting nation, its currency is freely tradable and there is full disclosure of the finances of its banks to the Bank of International Settlements, or BIS. And therein lie the problems. A consultant, Anantha Nageswaran writes,"The internationalization of the Chinese currency is wholly incompatible with the renewed centralization of power and concentration of renewed decision-making authority with the president and his coterie. Nor does it go with the heavy-handed and interventionist approach to managing declines in the stock market and centrally directed flow of credit to public-sector investments this year. China is not only not progressing towards being a market economy but it is regressing." Xi Jinping is concentrating all power in his hands. He is referred to as 'core' leader and is aspiring to be as strong as Mao Zedong. In January, China devalued the RMB which resulted in a sell off in the stock market. The government stopped trading for a day and banned short selling of stocks. Last August the government banned large shareholders from selling stocks for 6 months. Hardly a sign of open market, is it? Billionaire owner of the Dalian Wanda group, Wang Jianlin called the real estate bubble the biggest in history. The BIS is warning about the dangers of China's rapid credit growth. Financier George Soros is worried about Chinese debt levels. Stimulating economic growth with more credit is not as efficient as before, $4 of new credit adds just $1 to the GDP. China's foreign trade is under pressure and not about to get stronger any time soon because the WTO is predicting a weak 1.7% growth for global trade. If Donald Trump wins the election next month and adds 45% tax on Chinese imports, as he has promised, it could reduce exports by $420 billion. Even if Clinton wins her hands maybe forced if the US goes into recession, as is feared. If the Chinese economy tanks there maybe a run on the currency. China allows residents to take $50,000 out of the country every year, but there is a large shadow banking system transferring money out of the country. How will it restrict foreign banks? Will the inclusion in the basket of SDRs be the nail in the coffin that has been missing till now? That is our prayer.