Mistranslated Chinese story causes trading panic
Guan Xiangdong, a reporter for the China News Service, is more at home writing about tourism than finance. But she was on duty in Hong Kong...
The Wall Street Journal
HONG KONG — Guan Xiangdong, a reporter for the China News Service, is more at home writing about tourism than finance.
But she was on duty in Hong Kong two Saturdays ago while financially savvy colleagues took the day off, and she cobbled together a story on the impact of a possible appreciation of the Chinese currency using bits and pieces of news and analysis gleaned from that day's local newspapers.
But four days later, her efforts ended up roiling the world's trillion-dollar-a day foreign-exchange market and sparking panic e-mails and phone calls among currency traders and fund managers from Singapore to Stockholm as the U.S. dollar tumbled.
The storm, caused by a bad translation of her report, ended quickly as the misleading text disappeared from the Internet after a brief time — but not before hefty damage had been done.
How a reporter for an obscure, semiofficial Chinese news service managed to spark such chaos — and losses for traders caught by the market's gyrations — says as much about editorial standards in China these days as it does about the jittery state of currency markets at a time when the United States is piling pressure on Beijing to appreciate its currency to help cut its huge trade surplus.
From her computer screen in the China News Service's modest Hong Kong newsroom, Guan's story, written in Chinese characters, worked its way Wednesday afternoon onto the Web site of the People's Daily — the organ of the Chinese Communist Party — in the form of an English translation so garbled it hardly made sense. The mangled translation of the story stated boldly that China was going to announce an appreciation after a meeting of U.S. and Chinese economic officials this week.
Still, when an Internet search engine threw the translation onto a screen in the London offices of Bloomberg's news agency, it was flashed around the world.
"It really freaked the market," said Claudio Piron, Asia currency strategist for J.P. Morgan Chase, who was on the firm's trading desk in Singapore when the story broke in the late afternoon.
Traders instantly dumped U.S. dollars and bought any Asian currency they could lay their hands on, mainly Japanese yen, Singapore dollars and Indian rupees. When Bloomberg and rival news service Reuters started casting doubt on the report, traders just as quickly tried to buy back the dollar. Some traders, says Mr. Piron, "got caught the wrong way around."
He added: "There were a lot of annoyed people."
Guan said she is flabbergasted at all the fuss. "I can't work out why it's got blown up like this," she said.
She maintains that all she did was trawl through Hong Kong newspapers for views on how an appreciation of the Chinese currency would play in the city — views that she vaguely sourced to "observers," not the newspapers she was drawing from. It turns out that her most important source was an editorial in the left-wing Ta Kung Pao.
What happened next was hardly Guan's fault. The online People's Daily got hold of her piece and farmed it out to a translator working from home. The translation stated that China had decided to revalue the yuan by 1.26 percent within a month and 6.03 percent in 12 months.
It turns out that the percentage figures Guan cited were simply forward market rates that she had lifted from that day's newspapers. Over a one-month and 12-month period, speculators on the nondeliverable forward market were betting that the yuan would rise by 1.26 percent and 6.03 percent.
Also, the item on the People's Daily Web site gave no source for the story and neglected to mention the article was ripped off from the China News Service.
The Bloomberg story flashed across trading screens just as Asian currency traders were winding down for the day and European markets were opening.
In Stockholm, Frederic Cho, who manages Chinese equities for brokerage firm Hagstromer & Qviberg, used the office loudspeaker to announce the news to startled colleagues and then started frantically searching for the People's Daily story on the Internet and dialing journalists and finance-industry contacts in Asia.
"It didn't make sense to me," he said. What central bank would telegraph a revaluation, with the exact numbers, a week in advance?
In Shanghai, Stephen Green, chief China economist for Standard Chartered Bank, was similarly puzzled.
"My initial thought was, 'This is very strange,' " he said. He got on the phone and started calling Chinese regulators. Eventually, his research team dug up the English translation and the original Chinese-language story, and figured out what was going on.
Immediately, he sent an electronic note around the bank explaining there had been a mistranslation.
There was a time when a story in the People's Daily had the imprimatur of the Chinese government. Foreign journalists would parse every phrase in search of nuances that could signal a change of policy. No longer. The official Chinese media, under commercial pressure to compete, often in real time, now struggles with basic accuracy. But the outside world hasn't caught up with this change.
After all, reasoned J.P. Morgan's Piron, "The People's Daily is the mouthpiece of the government."
That logic helps explain why about $2 billion, by Piron's reckoning, was traded in the space of a few minutes after the Bloomberg story was issued.
The widespread belief is that an appreciation of the Chinese yuan would trigger a wider revaluation of currencies around Asia, where central banks have been intervening massively to keep their currencies cheap and their exports competitive.
Bloomberg defended its handling of the story. "If China's government newspaper runs a story saying China is relaxing its currency peg, that is big news, and it's natural that it should be on Bloomberg," said Judith Czelusniak, Bloomberg's spokeswoman, who is based in New York. "We'd be remiss in not reporting it," she said. When the People's Daily announced that its story was a poor translation "we reported that immediately," she added.
Reuters added to what turned out to be a chain of confusion. At one point, it flashed the news that Bloomberg was quoting the People's Daily as reporting a yuan appreciation.
"When the markets started moving, we covered that," says the regional editor in charge, Adam Cox. Searching for a basis of the movement, he says his team heard from currency-market traders that a Bloomberg report on China's yuan was responsible. When his team found a copy of the story, he said publishing a Reuters version attributed to Bloomberg was an easy decision. "There was no real delay," he said.
After yanking the story, editors at the online edition of the People's Daily expressed regret, albeit with some defensiveness.
"We are very sorry that the translation was not accurate — it is our mistake," said one editor, who declined to be identified. But the editor also took a swipe at the China News Service. Its reporter "put too many vague sentences in the story which eventually caused our mistranslation," the editor said.
When China previously adjusted its currency exchange-rate system in 1994, the official Xinhua news agency published 2,500 words on the subject. The story explained in laborious detail how the system would be adjusted. The announcement was made on New Year's Day. And for good measure, that day was a Saturday.
The headline in a Goldman Sachs research report late Wednesday on the day's bizarre events reflected the wry mood among investment banks in the region. "Lost in translation" it said.
Matt Pottinger and Qiu Haixu in Beijing and James T. Areddy in Shanghai contributed to this article.