KALL - Watch The Yuan

• China cannot do what it needs to do monetarily and economically without the yuan weakening.
• China's economy will and likely already do need lower rates given the effect the property market has on growth.
• It will also need some sort of QE-type program or at a minimum a significant printing of RMB to recap Chinese banks. This would boost the USD/CNH rate.
• This weakening of the yuan allows exports to pick up slack during the adjustment phase of rebalancing the economy to consumer driven rather than industrial and construction.
• The easing of policy in China is not a risk on event, as it would be in response to a major downturn and in my view a hard-landing. Long-term Japanification claims about China will persist.

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