Many assumptions about China held by global market players, such as thinking Beijing wants a weaker yuan or that low oil prices are caused by the mainland's slowing growth, are simply wrong, according to a leading Chinese policy adviser.
Li Daokui, director of the Center for China at Tsinghua University and former member of the People's Bank of China (PBOC) monetary policy committee, said prominent hedge fund managers, including the likes of Kyle Bass, have misunderstood the world's second-largest economy.
For one, focusing on the currency is "the biggest mistake in reading the Chinese economy," said Li on the sidelines of Thursday's Boao Forum for Asia conference.
"There is no need for the Chinese economy to rely on a big boost of exports....the economy is still facing a big trade surplus."
Ever since Beijing surprised the world by unexpectedly depreciating the renminbi in August, money managers such as Kyle Bass, David Tepper and Bill Ackman have ramped up bearish bets against the yuan. Goldman Sachs predicts the dollar will be fetching 7 yuan by the end of the year, from 6.5 currently, amid expectations for looser monetary policy and the government's desire to boost sagging exports.
But exports are no longer as important as before the global financial crisis, Li explained, adding that the sector now makes up 20 percent of gross domestic product (GDP), compared with 35 percent previously.
"The renminbi is already an international currency in the region, so when it devalues, everybody devalues. The net impact is almost zero," he added.