China devalues ​​its currency by 2% stimulate its economy – Les Echos

This is an announcement that even the experts have not seen it coming: China lowered by almost 2% on Tuesday, the benchmark rate of its currency, the yuan, against the dollar. If the Chinese authorities refuted having made a devaluation of their currency, yet this is the case and this decision is a small event. For, unlike the European Central Bank (ECB) and the US Federal Reserve (Fed), the Chinese central bank (PBOC) sets a daily central rate around which the yuan is allowed to fluctuate within a limited range of 2%. By bringing the rate to 6.2298 Tuesday yuan to the dollar, against 6.1162 the previous day, the Chinese central bank, saying “a new way of calculating its central rate” has made to its sharp reduction since 2005.

This adjustment comes as China’s economic slowdown signals have multiplied in recent months. The latest example: the sharp fall in exports in July (- 8.3% over a year), to which the devaluation of the yuan is a direct response. “Maybe he did were only economic instrument that the Chinese authorities to revive the economy? “ asks Jean-Joseph Boillot, adviser to French research center in the field of international economics (CEPII), which does not hesitate to describe the decision of ” weapon of last resort “.

Relocation in Southeast Asia

The reduction of the reference rate could indeed slightly boost exports countries. These have suffered in recent years, the rise in the yuan against the dollar and the euro, the continued rise in wages and the slowdown in global demand. “ Exports are no longer the number one engine of the Chinese economy, , however, reminds Jean-Joseph Boillot. But the central bank wanted to send a signal to the export sector so that the country can continue to run factories, “ while China has made numerous relocations in Southeast Asia, where labor is cheaper, in the last decade. For several months, the Asian giant aims to rebalance its growth model, relying more on domestic consumption. However, reforms in this sense are slow to produce the desired effects. As for domestic investment, third engine of the Chinese economy, it is also deemed insufficient. “In fact, domestic demand helps support growth only 3 to 4% per year, explains Jean-Joseph Boillot. The Chinese authorities have also underestimated the demographic collapse in progress, which results in a preference for household savings. “

The devaluation of the yuan do not seem able to stop the brake on an economy undergoing restructuring. According to Beijing, the growth should reach around 7% in 2015. “But we will be closer to a 5% growth, by Western standards, that 7% announced by China,” estimates Jean-Joseph Boillot. “The fear of the Chinese authorities, it is not so much the economic downturn, which is long overdue, it is the speed of this slowdown, adds the expert. And if the Communist Party was unable to make a soft landing, the political cost would be very hard for the regime. “

Adrien Lelièvre, Les Echos