China’s Devaluation: Opportunistic or Overdue?
- Aug 27, 2015
By Peter G. Hall, Vice-President and Chief Economist, Export Development Canada
Just in case you were getting too comfy at the cottage, China offered up a summer storm: a one-two gut-punch of currency devaluation. What has followed is a wave of reaction that has still not settled down, and a lot of speculation as to China’s rationale for the move. Opinions are varied. Was this a competitive devaluation, aimed at shoring up an ailing domestic economy by boosting trade? Or was it just time for a RMB reality check?
One thing’s for sure, it took the world by surprise. Few if any saw a change to the relatively stable path the RMB has taken since early 2014. Thus, the 1.9 per cent drop against the USD on August 11 and the further 1.6 per cent the following day, the largest swing since August 2005, rocked markets. The speed was perhaps more shocking than the actual amount of movement, but the real jolt was the departure from a steady and predictable currency management program which had been
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