Appearing to be against central policy the devaluation of the renminbi yesterday took everyone by surprise. Previous statements have suggested that devaluation was not the answer to boosting export growth. The devaluation was relatively small and therefore unlikely to affect exports greatly anyway so why did it happen? The article below provides good insight.
Where I struggle to understand commentators though is with the negative rhetoric of slowdown in the Chinese economy. We should not forget that GDP is now over $10trillion (IMF figures) and still growing by $60-70bn each year. In any developed economy that would be considered a boom and the brakes would be applied to slow down the pace of growth. So let's not kid ourselves that this currency move is a sign of pending recession.
The devaluation is part of a process in my view to gradually allow the currency to respond to markets and quite likely in the future to be freely floated.
According to conventional wisdom, wars are easy to start and difficult to end. Similarly Beijing’s devaluation, the biggest one-day currency move since 1993, represents the latest skirmish in an emerging battle which, analysts warn, may be hard to reverse.