The RMB was found by the PBoC to be overvalued in contrary to the beliefs that this currency was undervalued. The discussion of this particular currency came to the forefront following the currency regime deregulation by the PBoC. If this organization should stop their interference, the ratio of dollar demand to supply would cause a dramatic decline in the worth of the RMB currency. This information is supported by the market operations and the actions of the investors. You may need to know that the valuation of most assets is not always indicated by the ‘market forces'.

The market forces is the balance and or ratio of supply and demand. This is not the only definition of the term as it is described in many fashion but it is generally the economic fundamentals valuation of assets. The market fundamentals that drive the demand and supply can be considered as an overvalued currency. Technical factors also drive the supply and demand of assets. They rely on the changes in terms of supply to demand that results from the activities other than what the fundamental factors create. This can be explained using China's approval of the QFII program. This program allowed investors not native to the Asian country to buy Chinese stocks. The inclusion of these Chinese stocks on the MSCI global benchmark would have or should have increased the demand immediately for Chinese stocks. This would result in the increase of prices that was unrelated to and improvement in the economy's outlook.

It is taught that if there was an increase in price, it would be by an imperceptible amount. This is due to the trading levels being consistence with the supply and demand fundamental balance. The aim is for Chinese investors to off load their stocks at the point prices are increased thanks to the foreign purchases, unfortunately this was not the case. The prices fluctuated as expected from buying and in instances where the purchases materialized. In this instance, the fundamental valuation that usually anchors of the prices was absent.

The consensus of many traders is that the fundamental valuation has no real significance to the drive of the market. This is the opposite of what is taught in schools and one might have to unlearn this notion. Instead of total rejection, it might be more beneficial to you analyze the market and identify the times and conditions the prices react to the fundamentals.

Without the intervention of the PBoC the RMB currency is sure to lose value but it is not an indication that the currency is overvalued either. The truth of the matter simply is, if you were to try and obtain information from the fundamentals it is almost assured that you will get the complete opposite of what you seek thanks to the market itself being largely driven by technical. This causes the RMB to remain undervalued but not by a whole lot.

Is it possible for the market to settle on a suitable value for RMB?

Is it possible for the market to settle on a suitable value for RMB?aDo you support free trade? Do you support supply side economics? Do you support fiscal deficit limits and debt? These are all questions that seem to be of some principles but they are not. The same can be said for the value of the RMB being determined by the market. The principles sometimes work in certain situations and fail to in others. It may be best for you to just determine the conditions that they may work. The question arises about the conditions that would make China decide on the markets setting the value of the RMB currency.

In a situation such as this, you would have to ask yourself a couple questions. Do you have any political objectives such as the redistribution of capital or plan to aid in the protection, until it reaches a level of competitiveness, of selected industries? To answer this question you may need to look at the exchange rate as a whole then decide in which direction you will move it in relation economy's fundamentals. Some of the distortions in the Chinese economy will need to be eradicated as they are responsible for weakening the mispriced economical inputs and capital. In their case it has left them with a dependence on excess capacity, debt and a state in division. Innovative incentives and created values may be shadowed by the politics.

China, The world's largest producer of Photovoltaic power (it is a method to convert solar energy into current) and also the largest producer and consumer of coal . China leads the world in its production of renewable energy, to that of combined production of Germany and France power plants. China is in leading production of renewable energy than fossil fuels and nuclear power. In September 2013, as an action plan, to control the air pollution, China's government desired to utilize more renewable energy as it has abundant water, wind and solar power than oil, coal and gas. In the year 2013, the coal production and consumption increased rapidly and later on, it dropped continuously by 3.7% in 2015. However the central government restricted and issued directions for construction of new coal plants in the country, and the National Energy Agency banned new constructions of coal mines for three months and sealed some thousands of small coal mines. In the year 2016, even though wind power generation capacity increased , nearly 26% of the total turbines were not utilized up to their maximum extent. Despite this, new turbines, which can generate 33 million kilowatts of electricity are installed, and now the country reached in generating the electricity to 129 million kilowatts per year. In previous years the over supply of wind turbines and the lack of smart grid to control the fluctuations resulted in the wastage of the wind, hydro and solar energy. To meet the demand and to stabilize the supply, the local government, along with some grid companies assigned power quotas to control the weakening demand. Coal plants are the easiest and fastest way towards the economic growth and in creating jobs.

Diversified Preferences

Some of the experts expressed that, the adopted policies of the local government are not appropriate and they are interrupting the development of the renewable energy sources. And others expressed that government supports fossil fuels rather than renewable resources which are cheap and supports the local people by creating the jobs. In the month of December in some parts of the country the respective authorities squeezed the production and levied more fee on wind, solar and hydro power producers and in some places the authorities reduced the price paid by the state from 40 to 75 %, to facilitate the local grid. This was strongly opposed by the renewable energy producers, this resulted a major loss for the wind energy producers. Due to the consequences, the wind power generating companies lost more than 18 billion yuan in production slots, and the world's largest wind energy firms also suffered a loss of 500 million yuan in 2015 as some of their turbines were forced to stop the production. Despite the demand drops, the local authorities support the coal fired power plants, without central government approval, approved 155 new coal power plants which is three times more that that of the approval rate of the previous year.

Increased Pressure

In the year 2014, the National Development and Reform Commission (NDRC) in China, had set up some long term future plans and targeted to increase the production of non-fossil fuel sources to more than 90% by 2050. Coal is the cheapest source of power generator, which costs 0.3yuan for one kWh, whereas 0.6yuan for solar power. To meet the goal now the government has to impose a pollution tax or a carbon tax on producers of fossil fuels, ultimately then there will be a rise in the cost of production of electricity. If this tax is levied, then by 2020, the coal power generation cost increases to 0.85 yuan per kWh to that of 0.51 yuan and 0.62 yuan per kWh for wind and solar energy.

One of the Main Functions of the NDRC is to formulate and implement strategies of national economic and social development, annual plans, medium and long-term development plans; to coordinate economic and social development; to carry out research and analysis on domestic and international economic situation; to put forward targets and policies concerning the development of the national economy, the regulation of the overall price level and the optimization of major economic structures, and to make recommendations on the employment of various economic instruments and policies; to submit the plan for national economic and social development to the National People's Congress on behalf of the State Council.

The central government has to observe the consequences that are occurring by the local authorities and has to take certain measures to control and implement the national level policies which supports the economy's growth and works wonders.

The Chinese policymakers had many doubts a couple years ago that almost cause one of Beijing's policy success to be halted on a global scale. These were the plans that were made for the development of China's new bank. Beijing faced many doubts facing investing in the Asian Infrastructure Investment Bank. These doubts arise from the notion that the country would not be able to convince other nations to support them. China was however able to overcome this obstacle thanks to a few Middle East governments who made significant cash investments. The course of direction was aided by the help of some very important European nations supporting them as well, regardless of the opposition shown by the U.S.

The prior Chinese vice premier and AIIB president along with other stalwart supporters and a former chief of the China Investment Corp.in combination with overseas assertion was able to make the idea of the Asian bank to become a reality. Despite the financial difficulties that China is currently facing, the success of the establishment of the bank only serves to give Beijing a confidence boost needed to effectively play its role among the national financial institutions. The country was lacking this confidence in the initial stages of this venture due to the belief that there would be no financial backing.

The call on the Southeast Asian nations was discouraging as the governments of the majority of these nations were just not capable of financially backing the venture. They were in full support but did not have the finances to invest in the bank. It was subsequently the Middle East nations that made investments in the bank as they needed infrastructure and had the capability to pay for it. The Middle East nations deal in Oil and they possess foreign money. The implementation of this bank will amplify the influence that the Chinese government has on the financial development on a global stage.

There have already been fifty seven countries that have jumped on the wagon with a fraction of a bout a seventh of these countries being Middle East nations. They include Iran, Israel, Egypt, Jordan, Qatar, Saudi Arabia and the United Emirates. The Chinese government has come under a lot of scrutiny with the question being asked if whether or not China is capable of properly and effectively operate a multilateral financial institute of this magnitude given the fact that the country has no prior experience in this field. It is the belief of many government skeptics that the AIIB will face losses.

Being a current member of the BRICS development bank was a factor that many used to challenge the credibility of China as the operator of this bank. The Chinese nation was to collaborate with the Russians on establishing another such lender. The implications that the Chinese government is unscrupulous would be brought to the forefront if an investment fund of this nature was established at the time suggested. The Russian government was fully with the idea of creating a bank with the Chinese. This was the argument brought by the AIIB proponents along with the fact that other BRICS bank members were competing to be the lead lender.

The AIIB will not only give China a stage to flaunt it financial influence but it allow the nation to receive positive feedbacks on the job being done. The Chinese government of the past was never for the idea of an institution of this magnitude despite the AIIB president's many pitches for one such institute to be erected in Beijing. The change in government since 2013 as seen China fully supporting the direction and ventures, the one belt, one road internal design and strategies for exportation. The Chinese leaders were persuaded to back the proposal of the bank's establishment by the potential forward movement of the ‘one belt, one road' plan by the AIIB. Zeng Peiyan, former vice premier who also leads the CCIEE was responsible of the proposal of the creation of the bank. The CCIEE supporting the proposal and the president of AIIB has had many consultations about the creation of the institute. It is the belief of many that the success of the AIIB is overwhelming and no one could have foreseen such great fortune and the response from so much people. The Asian Infrastructure Investment Bank (AIIB) is a multilateral development bank investing in infrastructure in Asia

China Railway Material Company (CRM), the biggest supplier for railroad construction materials has suspended all trading on its bonds worth 16.8 billion yuan. This is the first trading halt for a bond security and investor has been fearful since. CRM bonds are traded on platform offered by NAFMII. The company divulged that it is facing cash flow problem to repay the debt and is drafting a plan for protecting bond holders. Resumption of trading for the bonds is uncertain and not specified. CRM is the first corporation under the central government's supervision to freeze bond trades in order to address its debt issues. It is one of the handful of Chinese corporations facing default issues for their bonds as China faces economy slowdown. Shanghai Yunfeng, a subsidiary under Greenland Holdings, China's 3rd largest real estate developer, defaulted on 2 debt notes worth 2 billion. The company refused to work with investigation launched by NAFMII. Sinosteel Corporation, also a government owned steel company had defaulted on its debt notes repayment worth 2 billion. Baoding Tianwei, another government linked entity had reneged on its local bonds worth 4.5 billion in yuan. Analysts are concerned that the debt issue will hit the bond market for nonfinancial companies for future years.

CRM's decision shocked bond investors and may be a signal of more debt woes. New bond issuance will be affected negatively in terms of pricing and cost. Increasing financial costs will restrict companies from raising funds in the bond markets. Banks, insurance entities and fund managers have pulled back bond investments, according to CIC. 49 planned bond issuances were cancelled for March and April due to market fears. Private and State enterprises have long had debt troubles. However government has been trying hard to contain the problem. Bond investors have been enjoying government support to guarantee the face value of bonds repayment. Government has been stepping in with cash funding support to prevent default. The new policies launched to control economic slowdown are coming to an end. Government is retracting its support for inefficient companies and cut excess capacity. Investors are used to trusting government bailouts and rarely find any debt problems, until recently. They accepted the minimal financial transparency by companies issuing the bonds. Timely information were not available from companies and investors have difficulties finding a valid contact for information.

In the years before investor are more concerned on the issuer's connection with the government compared to disclosure of financials. It is not feasible anymore. Beijing policymakers have begun drafting rules in order to strengthen disclosure of financial info and credit rating for bonds. China Regulatory Commission for Securities and China Central Bank are heading the initiative. The guidelines could change the investing landscape by addressing the communication channel problem. Investors have been more careful since government issued orders to diminish overcapacity. Tianwei bond default made investor very nervous. Transparency issue forced NAFMII to investigate in detail the parent company for Yunfeng. Yunfeng has massive fund raising since 2012 to 2014, raising a total of 8.2 billion from private bond markets. Yunfeng transferred a few property to parent company Greenland and many feared bond default would happen when Greenland stops backing Yunfeng's debt. Bondholder tried requesting for financial reports from the underwriter but was not successful. Bondholders are prepared to sue Yunfeng and Greenland for lack of financial disclosures.

Investors questioned the bond underwriter status for Huayu Energy which missed repayment deadline for its bonds. Regulators are investigating any improper transfers from bond issuer's bank account to parent companies or subsidiaries. Tianwei is on the brink of default but share price were rising for the listed arm. The company arranged a few asset swaps since 2011 by transferring most valuable assets to Baobian Electric, a listed entity in Shanghai Stock Exchange. Baobian is profitable since 2014 and share price is steadily rising. However, Tianwei is suffering financially and had since defaulted on four term notes batches. Bond investors in the defaulting companies are trapped in a deteriorating credit environment. There is a real danger of high leverage for capital taken from retail investors. Wealth manager invested the proceeds in these bond markets.

China Railway Materials Company Limited (CRM) was reconstructed from China Railway Materials Commercial Corporate(CRMCC), the former Materials Administration Bureau of Ministry of Railways(MOR), with the approval of the State-owned Assets Supervision & Administration Commission of the State Council (SASAC).

CRM is an ultra-large supply chain services provider focusing on serving customers in the markets of railway materials, steel products and minerals in China. Headquartered in Beijing, CRM has established over 1,000 subsidiaries, branches and operation offices, including seven operating overseas subsidiaries in Hong Kong, the United States, Australia and Sierra Leone.

CRM provide railway materials supply chain services including procurement, supply, quality control, inventory management, logistics, processing and information management in respect of railway materials such as railway diesel products, steel rails, key components of rail vehicles and steel and cement for railway construction, to serve the key sectors of the railway industry in China, namely, railway operations, rail vehicle production and railway construction.

A systemic risk is surfacing due to widening spread between asset yields and debt costs. Credit rating institutions have so far declared the market for bonds as being safe, but still can succumb to random risks. Analysts fear there are more problems to come. Many bonds could be on the verge of downgrade and when that happens, there could be a huge wave of sell-offs.