Chinese yuan: everything depends on what happens next

People’s Bank of China described move as a ‘one-off’ but if Beijing seeks to boost imports through devaluation, it will be a painful process

China’s weakening of the yuan by 1.9% is an event that, in a year’s time, will be seen either as an irrelevance or a major turning point for the global economy. Everything depends on what happens next. If the tweak heralds the start of a proper devaluation to boost exports, the world economy will have to adjust to a new China. The process would be painful.

The “nothing to worry about” argument dominated on Tuesday. The People’s Bank of China described the move as a “one-off” and presented its decision as part of the five-year plan to allow more liberal winds to blow in China’s markets. Investors had thought the yuan should be lower against the surging US dollar; now it will be and, in future, market forces will play a greater role in fixing the value of the Chinese currency.