The night of the long knives


China: Not quite the Gang of Four, but still!
China: Head of the PBOC to be pushed?
Eurozone: German business confidence slows
Australia: RBA dumb on housing
United States: Plenty to go in US housing uptick

Good morning,

Years ago when the West wanted to figure out what was happening in the Soviet Union, the talent was how to spot who was in and out by their proximity to Brezhnev as the Politburo lined up to check out the Red Army in Red Square on May Day. Typically a power struggle in the internal politics was preceded by rumours of a change of policy here or there.

In China, there is still an element of Kremlinology. While not quite the Gang of Four, power shifts are still a matter for intrigue and speculation.

Last week markets were whipsawed by opposing news on China. The first reports said the PBOC didn’t want to act to stimulate the economy in order to squeeze out some financial excesses. Just days later, the PBOC pumped 500B yuan in liquidity into the five largest banks.

The reasons for the opposing reports might now be more clear – there’s a power struggle at the PBOC. The WSJ reported today that long-time Governor Zhou may be replaced by someone more open to stimulating the economy, but less in favor of financial reform.

Chinese leader Xi Jinping is considering replacing Mr Zhou, say party officials, as part of a wider personnel reshuffle after internal battles over economic reforms.

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Global Macro-Daily Note 25th September 2014


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