The expected move to free up more funds for lending—by reducing the deposits banks must hold in reserve—is directly aimed at countering the effects of a weaker currency, which could send more funds away from Beijing’s shores. The moves reflect an economy increasingly failing to cooperate with Chinese leaders’ playbook to control the world’s No. 2 economy.
Wei, Lingling and Magnier, Mark. "China's Economic Turmoil Spreads" The Wall Street Journal. Monday, August 24, 2015, A1, Accessed on August 24, 2015, http://www.wsj.com/articles/china-to-flood-economy-with-cash-as-global-markets-lose-faith-1440380912
For decades now Beijing has been lauded for its management of the Chinese economy. But economies, as Taleb reminds us, aren't that amenable to being managed. They often fail to cooperate. In fact, the heavy hand of direction in any complex system seems to cause unforeseeable problems which we're only starting to see again in the world economy this week:
Evolution proceeds by undirected, convex bricolage or tinkering, inherently robust, i.e., with the achievement of potential stochastic gains thanks to continuous, repetitive, small, localized mistakes. What men have done with top-down, command-and-control science has been exactly the reverse: interventions with negative convexity effects, i.e., the achievement of small certain gains through exposure to massive potential mistakes. Our record of understanding risks in complex systems (biology, economics, climate) has been pitiful, marred with retrospective distortions (we only understand the risks after the damage takes place, yet we keep making the mistake), and there is nothing to convince me that we have gotten better at risk management.
Taleb, Nassim Nicholas. Antifragile: Things That Gain from Disorder. New York: Random House, 2012, 348.
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