This decision aims, according to observers, to boost China’s foreign trade, whose difficulties hinder the country’s economy. Penalized by the high level of the yuan, China’s exports have collapsed by more than 8% year on year in July.
The PBOC warned Tuesday that the sudden drop in the level of the yuan was ” a single action “and would not be repeated, because simply reflecting a new way to calculate it, taking greater account of changes in supply and demand on the market. However, on Wednesday morning announced rate by the central bank is still lower than the level reached Tuesday by the Chinese currency closing at the end of the day trading at 6.3232 yuan to one dollar.
Analysts said China’s decision could be linked to the willingness of Beijing to see the yuan join the exclusive club of major world currencies of reference. China and aims to expand the use of its currency outside its borders by obtaining its inclusion in the Special Drawing Rights (SDRs), the unit of account of the International Monetary Fund is currently composed of four currencies (dollar, euro, pound and yen). But the IMF, which will make its decision in November, recently asked his conditions: the Chinese currency must therefore develop in accordance with market fluctuations and must be “freely usable”. Tuesday, shortly before the second devaluation is announced, the Fund and welcomed a “positive step” but said that these measures will not have “direct involvement” on its decision to include or not the Chinese currency among international reference currency.
Meanwhile, the United States responded Tuesday with the utmost caution to the devaluation, which could seal their exports but partly meets their requirements on the convertibility Yuan.
The devaluation of the Chinese currency affected the stock markets on Wednesday over the world, with openings downward in Paris, London, Frankfurt, Tokyo, Hong Kong and Shanghai.
Coup brake on China’s economy
China’s industrial production slowed sharply in July, according to government figures released Wednesday. Especially penalized by a sharp decline in exports by the slowdown in economic activity in the country, it has swelled by 6% year on year last month, announced the National Statistics Bureau (BNS). This is well below the 6.8% increase recorded in June, well below the median forecast of 40 analysts surveyed by Bloomberg (which anticipated + 6.6%).
No improvement either in the retail sales side barometer of consumption of Chinese households: they were up 10.5% last month, according to the NBS. Again, this is a slowdown from the previous month (they had increased by 10.6% in June), and below market expectations, which banked on stabilization.
This burst is disappointing statistics published a few days after new worrying figures on China’s foreign trade. With a dip of more than 8% over a year in exports in July, the Asian giant sees crumble one of its traditional pillars of growth
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