EFTA01458249.pdf

Pk* pedilietts Ras 1'.etd r.obra Irnvrtmarn tivtlie hghts Auct•diss prsputivos IGRbho 1441torrinuon Interview The big picture China's transformation from dragon to panda - a process that cannot be completely controlled by the government, but will open up opportunities. Beijing must Mr. Wehrmann, we had planned to talk in order to have the yuan included in its about the turnaround in U.S. rate policy. Special Drawing Rights (S0R) basket. get used to the However, the Chinese central bank (PBoC) Moreover, China is quite aware of the fact stole the Fed's thunder in August. It that, in the long run. it will need to accept unpredictability followed in the steps of the Swiss National that key variables such as interest rates, Bank (SNB) and shocked the markets loan volumes and the exchange rate are of free capital by taking a step back from currency determined by the market. In tact, a more intervention. Now, the yuan is no longer relaxed exchange-rate regime is only one markets. strictly pegged to the U.S. dollar. Supply of several measures Beijing has taken in and demand will influence the exchange order to liberalize the capital markets. On rate to a greater extent. That has caused the other hand, Beijing is still reluctant considerable market turmoil. Why have to totally give up control over these key investors reacted so nervously? variables. In all probability, the PBoC in China's case, the currency-market will peg the yuan to a broader currency reaction was still relatively moderate, not basket while preserving some scope for least due to the support measures taken action in the medium term. In the long bythe PBoC. The yuan depreciated by run it will float the yuan and intervene about 5% versus the U.S. dollar within only sporadically. From my vantage point, three days and then stabilized. However, this is necessary and useful, A country due to its peg to the U.S. dollar it had of this size, which moreover has a share previously appreciated against most other of almost one-sixth in total global trade, currencies and, in fact, the real effective cannot peg its currency to that of another exchange rate of the yuan has appreciated country. A more relaxed exchange-rate 50% versus the U.S. dollar since the regime will enable quicker exchange- financial crisis. Against this background, rate adjustments, which will help to a yuan devaluation actually makes sense. counteract or even prevent large-scale But markets seemed to regard this step market imbalances. as an admission of the PBoC that China's economy is weak. The devaluation accelerated the downtrend on global stock markets. Was What will happen now to the yuan? it an accident that the PBoC took this step That remains to he seen On the one hand. just at this point in time? China wants to be adequately represented Of course, the devaluation has to be in international institutions In view of its seen in the context of the economic economic strength. That is why it wants environment as a whole. Investors to comply with the recommendations of thought it was another sign of China's the International Monetary Fund (IMF) growth slowdown. At the same time, Past performance is not indicative of future returns. it is not possible to invest directly in an index. No assurance can be given that any forecast or target will be reached. Forecasts are based on assumptions, estimates, opinions and hypothetical models or analyses that may prove to be incorrect. Investments come with risk. The value of an investment can fall as well as rise and your capital may be at risk. You might not get back the amount originally invested at any point in time. .3. 0 tts= .... COVx-es I Arnim." Eck V-on SWA0r4t44 20'S CONFIDENTIAL - PURSUANT TO FED. R. CRIM. P. 6(e) DB-SDNY-0118073 CONFIDENTIAL SDNY_GM_00264257 EFTA01458249