China’s renminbi devaluation
China this week stunned financial markets with the biggest devaluation of the renminbi in two decades, only to intervene to stop the slide. Was it a move towards liberalisation or a desperate bid to halt the country’s economic slowdown? Ben Hall discusses the move and its consequences with James Kynge and Gabriel Wildau.

You are not alone. The renminbi is with you. But it has managed to pull off the impressive trick of being a lot less undervalued without actually having risen very much.

The IMF said this week what others (especially the Peterson Institute, whose estimates often get a lot of airtime on Capitol Hill) have also suggested: the RMB is a lot less undervalued than a year ago. The Fund, which now combines various different concepts of currency valuation to take a judgment, called it “modestly undervalued” without putting a number on it.

The Peterson gurus are less coy: they reckon the RMB needs to rise just 2.8 per cent in real trade-weighted terms (i.e. against a basket of currencies, adjusting for inflation), and by 7.7 per cent against the dollar, to achieve a sustainable external position. These are big changes from a year ago, where the trade-weighted and dollar undervaluations were 16 per cent and 28.5 per cent respectively.  (Naturally these changes don’t seem to have made much difference to the China-bashers in Congress or out on the campaign trail, who tend to use the Peterson estimates when it suits them and ignore them otherwise.) Read more