
Why Did China Just Devalue the Yuan? How Trade Works with Free-Floating Currency - joshuafkon
https://www.cassandracapital.net/post/why-did-china-just-devalue-the-yuan
======
cletus
This is one of the few articles on HN that I read the whole way through. Good
job whoever wrote it.

The interesting thing here is that the case is made that China can (and does)
manipulate its currency and that devaluing one's currency is what has led to
the shift of manufacturing jobs from the developed world to China (and other
places) but it also notes that this suppression of currency value is becoming
increasingly difficult.

Doesn't this support the argument that currency manipulation is ultimately
time limited?

On a side note, I always like to point people to this [1] on the subject of
free trade, specifically the conflation between free trade and free movement
of capital.

[1] [http://economixcomix.com/home/tpp/](http://economixcomix.com/home/tpp/)

~~~
melling
“Recently China allowed their currency to fall below the key level of 7 yuan
per dollar.“

China isn’t devaluing their currency, they are supporting it at its current
level and artificially keeping it above 7.

When they stop supporting it, it decreases in value. Where would their
currency go if they stopped propping it up?

~~~
varjag
Do they? All complaints I heard so far is CCP keeps yuan artificially cheap to
prop the exports.

~~~
CharlesColeman
They have in the past (to fuel/build their export-driven economy), but I think
things might have changed recently with the trade war.

~~~
dragonsh
Trade war is one reason, other is external debt in USD. This is explained in
great details in article that China needs 100 billion dollars every year to
service its external USD debt. So they don't want to let CN¥ fall in value
significantly.

------
socrates1998
Great article. I worked at a Forex trading firm and this is a great way to
explain China's dilemma.

Really, this is kind of what happened to every other east Asian economy the
past 60 years. They grow at a rapid pace for about two decades, then hit a
ceiling as their low currency value becomes a hindrance rather than a benefit.

Like the author explains, this is the Japanese model. And every country who
has copied it as done so less effectively than the Japanese.

First Japan, then Korea, then Taiwan, now China.

For me, the fundamental advantage in this trade war with the US is that the
Chinese are replaceable for the American economy. Sure, there will be some
pains as companies move their factories from China to Vietnam (or wherever),
but ultimately, there are other places in the world with cheap labor.

There is no other America in the world. China's number one customer is America
and China doesn't seem to realize this. If you don't keep your relationship
good with your number one customer, then you will lose them eventually.

And that's what's happening.

The Chinese have to get better at international relations or they will be more
isolated as time goes on.

No one wants to deal with a partner who bullies them around. Especially when
there are better deals on the table.

~~~
rossdavidh
You were going great until that very last part.

But, it is clearly true that China's current position is not unlike that of
Japan in the 90's, or South Korea not long after.

I think China's advantage is that they are big enough to create a large
consumer market themselves. The U.S. was once in this position, as was the
U.K. before them, and they both managed to make the transition from selling to
other, richer markets to selling to themselves.

The big problem is, that both the U.K. and the U.S. had periods of internal
stress during that transition, and because they were democracies they could
blow off steam with electoral "revolts" instead of the literal kind of revolt.
Perhaps China has the internal stability to be able to avoid this problem, but
perhaps not.

~~~
simonebrunozzi
Well, not so fast. You are correct that China is indeed different, but if you
look at hard data [0], the internal consumer market in China is not
substantially larger than Japan, and certainly way smaller than US.

Furthermore, the consumer market data includes food, which by a large extent
has to remain a domestic product. If we assume that food is 11% of the market
(based on "$1.46 trillion worth of food in 2014." in the US [1]), then:

US domestic market (without food): $13.32T ($11.85T)

EU domestic market (without food): $9.61T ($8.55T)

China domestic market (without food): $4.7T ($4.18T)

Japan domestic market (without food): $2.76T ($2.46T)

As you can see, China is not big enough, by a large margin.

[0]:
[https://en.wikipedia.org/wiki/List_of_largest_consumer_marke...](https://en.wikipedia.org/wiki/List_of_largest_consumer_markets#)

[1]: [https://www.ers.usda.gov/topics/food-markets-prices/food-
ser...](https://www.ers.usda.gov/topics/food-markets-prices/food-service-
industry/market-segments/)

~~~
Aperocky
If the world stay where it is today forever, sure.

You could well bring up that 30 years ago China is about as wealthy as Africa,
and that it is a total non-factor in the world economy.

The bottomline is this, China had 1.4 billion people, they will consume, even
if they consume 1/4th as much individually, the market will be the same size
as of the US. It probably already happened, just that services in China is
much cheaper. Out of the 13T consumption that is the US market, how much of it
is in the form of goods? You'll probably get the same level of service in
China for 1/4 the price. The growth of consumption in China has been
consistently greater than the growth of the economy as a whole for the past 10
years, and it'll likely happen in the foreseeable future as China's export
shrink and infrastructure spending halts.

~~~
rossdavidh
Yes, all of that.

In addition, there is a lot of Chinese money that is going abroad, to buy real
estate in Vancouver and etc. If this were all brought home as domestic demand,
they would have an even larger market to sell into domestically.

But, this requires: 1) that it be spread out a little more evenly, and/or...
2) that the people with the money trust their future in China enough to bring
it all home

Neither of which is easy. On the other hand, neither is impossible, so it
could happen.

------
User23
It should be noted that a central bank with a floating currency is constrained
in its control of interest rates the more it controls foreign exchange and
vice versa.

Using tariffs to constrain the actions of foreign central banks is really
quite interesting. While China has succeeded in offsetting tariffs with
inflation for now, they are paying for it by giving up policy flexibility,
whereas the US can effectively control the price of the yuan with tariffs.

------
syntaxing
This is an awesome article! Is it possible to write an article about the next
recession and it's implications? Our current financial health and environment
is really different from the last one and every person I know keeps on telling
how bad the next recession is going to be.

~~~
tabtab
Even if the next recession is mild, the US has very little room for a stimulus
thanks our debt. It's hard to predict the depth of a future recession, but one
can say for sure that we have fewer options because of the debt. Keynesian
principle is basically a fancy form of "save up for rainy days". We didn't, so
hope the storm is short.

~~~
MuffinFlavored
$4t was printed to bail out the banks. What is stopping more money from being
printed this time, in the form of economic stimulus?

~~~
tabtab
If you mean "Quantitative Easing", it's arguable whether it's the same as
"printing money". I won't get into that debate here.

In a related issue, there's a theory making its circles in both right and left
camps that if inflation is sub-par for a while, say below 2%, then printing
more money won't cause problems.

Why inflation is lower than expected is an economic puzzle. But printing money
to avoid paying debt may create new economic puzzles. If they try it, try it
gradually please.

(The ideal annual inflation rate tends to be around 2.0% to 2.3%, based on
historical record. This is in aggregate. Highs or lows tend to affect
different people differently.)

------
partiallypro
The US really has China in a bind here, and few will admit it. China needs to
weaken its currency to offset tariffs by making their exports cheaper...but
China is very very short on dollars, and each devaluation makes their onshore
debt much harder to maintain. I'm sure China is waiting out the 2020 election,
hoping the next President will be more dovish on China...but I think everyone
(except Biden) is pretty hawkish on China within that Democratic field.

~~~
ETHisso2017
>China is very very short on dollars

$3T of dollar reserves would like to have a word with you.

~~~
partiallypro
a) Investment banks don't believe that number is completely accurate

b) China has used a lot of reserves propping up offshore RMB.

c) It's a lot more complicated than that.

d) 1.2 trillion in dollar debt has to be rolled over just this year

[https://www.bloomberg.com/opinion/articles/2019-01-06/china-...](https://www.bloomberg.com/opinion/articles/2019-01-06/china-
s-dollar-debt-is-surging-and-that-spells-trouble)

------
tanilama
China has surpassed US last year in terms of consumption of retail goods.

China's advantage is no longer cheap labor TBH...It hasn't been cheap for a
long time now.

America is unique and important...But so is China.

~~~
socrates1998
If the Chinese protect their domestic market from American companies, then
there is no point to staying on good terms with them.

Look what happened to Google. Google made all these concessions to the CCP and
still got fucked.

China can't dangle the carrot of the Chinese market if they don't let American
(or Japanese or European) companies have decent access to them.

China teases access, then pushes out the company after they steal their
technology and intellectual property.

The world is finally wising up to this scam.

~~~
RobertoG
So, the Chinese are evil. Maybe, but then, there is nothing exceptional about
their evil.

If you are old enough you will remember when Japan were the evil one in the
80's.

Or we can go to the history books and see how all those tactics is what the
USA used against Britain.

~~~
seanmcdirmid
Japan was never considered evil in the 1980s, even the economic competition
aspect is overblown in today’s view. China has always had a much more
complicated relationship with the USA, even in the 80s when relations were at
a peak due to the Sino Soviet split (and before Tiananmen).

~~~
grogenaut
This is a bit revisionist. As a kid I remember japan being pitched at the
economic enemy quite a bit in the 80s and early 90s. "They're buying our
country" was one refrain, like the claim with "the Chinese are why I can't buy
a house" right now. Also things like
[https://en.wikipedia.org/wiki/Rising_Sun_(novel)](https://en.wikipedia.org/wiki/Rising_Sun_\(novel\))
and a lot of other fiction showing us (americanos) working for japanese
business overlords.
[https://www.youtube.com/watch?v=CS_17xMmmLY](https://www.youtube.com/watch?v=CS_17xMmmLY)
for another example.

~~~
seanmcdirmid
That is a even a bit more revisionist, our relationship with Japan was very
friendly in the 1980s, and the economic competition aspect was more benign
even in the rust belt. As long as we are drawing from pop culture, the movie
Gung Ho
([https://en.wikipedia.org/wiki/Gung_Ho_(film)](https://en.wikipedia.org/wiki/Gung_Ho_\(film\)))
is a more accurate reflection of the sentiment of the time.

There has just to be a gung ho kind of movie for China, as far as I can tell.
Likewise, Japan continued to be a top strategic ally of the USA in the 80s, it
was never seen as a strategic competitor like China is today.

~~~
aksss
I remember relatives in the eighties expressing worries about the Japanese
buying up farmland, and the movie Rising Sun or whatever - the theory being
that what Japan couldn’t do militarily they were going to accomplish
economically. There was concern about Japan as an enemy but never solidly like
we have with China today. As you say, Japan never stopped being an ally, and
China is barely this side of detente.

------
simonebrunozzi
Very useful, in the context of this article, to see the details of the
Eurozone trade balance, "Latest Eurostat data on international trade" [0]. The
total surplus for the entire Eurozone is €20.6B.

Noteworthy to look at the top countries by trade surplus, where Germany
represents the 900-pound gorilla:

Germany: +€111.9B

Ireland: +€33.9B

Netherlands: +€32.9B

Italy: +€22.1B

Czechia: +€10.8B

Everybody else is either close to zero, or negative. Here's the worst ones:

France: -€33.6B

Spain: -€15.8B

Greece: -€11.0B

Portugal: -€10.3B

[0]:
[https://trade.ec.europa.eu/doclib/docs/2013/december/tradoc_...](https://trade.ec.europa.eu/doclib/docs/2013/december/tradoc_151969.pdf)

------
tareqak
On the flip side, a lot of countries that the United States trades with peg
their currencies to the US dollar. See the last section ( _Why Countries Peg
Their Currency to the Dollar_ ) of [https://www.thebalance.com/what-is-a-peg-
to-the-dollar-33059...](https://www.thebalance.com/what-is-a-peg-to-the-
dollar-3305925) and [https://www.thebalance.com/what-is-a-
petrodollar-3306358](https://www.thebalance.com/what-is-a-petrodollar-3306358)
for details.

------
dec0dedab0de
I would think it's better to have more imports than exports. The importer gets
goods and services, the exporter gets numbers in a computer. Though I suppose
it's a problem when the importer doesn't know how to take care of itself
anymore.

~~~
option
the exporter then uses those numbers to buy resources (natural and political),
real estate, media and influence inside importer. Until the importer is 100%
dependent

~~~
jpollock
Then the importer has a revolution, wipes all debts and starts again.

~~~
s1artibartfast
Seizing the assets of foreign national corporations within the US would be
mutual assured financial destruction. Markets would crash and plunge the
country into depression/recession as foreign capital flees the US.

~~~
ummonk
Didn’t happen when the US did it to Iran.

------
kakali
This article opens up with a mistake? It's 7 yuan per dollar. Not the other
way around.

~~~
joshuafkon
Whoops - good catch! Little dyslexia I guess! Thanks!

------
kissickas
Interesting article. One thing that wasn't made clear - who is holding the new
Chinese debt? Chinese consumers are the first borrowers, I assume, but then
are local banks borrowing from the Chinese central bank? Is the central bank
then borrowing from abroad, and why is this debt dollar-denominated? Why don't
they just pay it off with cash instead of continuing to put that cash into US
Treasuries?

PS, @joshuafkon, you have an unnecessary apostrophe in the "it's" in the last
sentence!

------
xivzgrev
What’s to stop exporting companies from increasing prices?

Say I’m a Chinese manufacturer of plates. I have an American customer buying
6m yuan worth every year. Previously that cost them $1m USD. Now it only costs
them $857k. In both cases I’m getting 6m yuan, so I’m happy. Or, do I increase
the price to 7m yuan because I know that’s what the customer Usually pays, now
I’m VERY happy?

Does this achieve the goal of growth (6m to 7m yuan) or does it not count
because the volume stayed the same?

~~~
joshuafkon
Well, currently (more or less) the devaluation just offsets the new tariffs
that have been imposed. So in real terms there wouldn’t be a huge change.

Absent the tariffs it would depend on the specific supply and demand for the
good. I suspect both the manufacturer and the customer would split the value
in some way.

Interestingly, the growth to the economy arises through how the devaluation
impacts the savings and consumption rate for the countries in question.
Weakening the yuan depresses Chinese household consumption and subsidies
foreign household consumption. It is this change in national savings and
consumption that drives the trade balance.

~~~
rbavocadotree
Why does weakening the yuan depress Chinese household consumption? Aren't
households buying Chinese goods with yuan, and therefore a weakening currency
shouldn't matter? Or is it that they have less purchasing power for foreign
goods and this effects household consumption?

~~~
ww520
A household has a fixed amount of yuan. More expensive foreign goods take up a
larger portion of that amount, leaving less for domestic consumption. Imagine
every household does it, leading to less demand for domestic goods.

~~~
9nGQluzmnq3M
Alternatively, households stop buying expensive foreign goods and substitute
cheaper but potentially inferior domestic goods (eg. baby formula that may be
laced with melamine). So domestic manufacturers can still win, even if
households don't.

~~~
mattrp
I’m under the impression - perhaps incorrectly - that a big portion of foreign
goods are related to mobile phone services purchased from overseas vendors.
It’s possible some of this can’t be substituted...but I don’t know what
percentage of spending this represents.

~~~
9nGQluzmnq3M
That sounds unlikely, given that Google's Play Store is blocked in China and
everybody uses local stores instead.

------
rehasu
Does this strategy still work in a world with highest possibility of migration
we ever had? If I live in a consumption repressed country and can see through
the internet that the consumption rate is much better in other countries, I
will also use my talent and resources to move to that country.

Since I can build a network online, since I can investigate laws online, even
of other countries, since I can book and prepay for different steps to take in
migration I have a much easier time than ever before to simply go somewhere
else.

At the same time the psychological bonding between people and nations is lower
than ever since the creation of nation states. If someone tells you they live
at 20% the value they would want to live, just because they want to support
their country, you would laugh about them.

And last but not least, more and more succeeding in the competition of
production talent and creativity is more important than anything else. E.g. a
soldier with low IQ and lots of muscles might have been great 500 years ago.
But nowadays he simply gets shredded by a drone that was constructed by a nerd
with technical talents and zero muscles.

Altogether it doesn't seem very logical to me that such a move can really
improve China's situation, if it makes them lose talent quicker.

------
known
Electric vehicles are still in nascent stage;
[https://twitter.com/spectatorindex/status/112909164662727475...](https://twitter.com/spectatorindex/status/1129091646627274753)

Till then everyday China need 504 million US$ to buy 8,400,000 bbl/day OPEC
Oil to drive its economy;
[https://en.m.wikipedia.org/wiki/List_of_countries_by_oil_imp...](https://en.m.wikipedia.org/wiki/List_of_countries_by_oil_imports)
and
[https://en.m.wikipedia.org/wiki/Petrocurrency#Currencies_use...](https://en.m.wikipedia.org/wiki/Petrocurrency#Currencies_used_to_trade_oil)

Hence China is selling/exporting its products/services to USA to EARN that
$504 million/day;
[https://twitter.com/spectatorindex/status/116150270980923801...](https://twitter.com/spectatorindex/status/1161502709809238016)

------
vagab0nd
I still can't wrap my head around this topic after reading the article.

>> Yuan is not able to escape China, and therefore while other countries might
see capital flee the country long before the point China has reached. China
has been able to prevent a collapse of its currency.

Why would Yuan escape China and why is it a bad thing for its currency?

~~~
joshuafkon
China has strict capital controls to prevent money from leaving the country.

If people believe that China is going to substantially devalue their currency,
the will try to pull money out of the country and invest it elsewhere.

The risk is that the currency would then devalue more than China wants - to
the point that they have very high inflation

[https://chinaeconomicreview.com/for-china-the-risk-of-a-
seco...](https://chinaeconomicreview.com/for-china-the-risk-of-a-second-wave-
of-capital-flight-is-now-severe/)

~~~
bduerst
Chinese wealthy have been historically moving capital out of China regardless
of the controls. It has been so prevalent that the newer housing development
next to where I live doesn't have the number four in any of their street
addresses.

Wouldn't a weakened Yuan make them want to move the wealth back, to capitalize
on the new arbitrage?

~~~
simonebrunozzi
What's with number 4? And, do you live in China or somewhere else where a lot
of Chinese wealthy bought property?

~~~
brobinson
[https://en.wikipedia.org/wiki/Tetraphobia](https://en.wikipedia.org/wiki/Tetraphobia)

------
NTDF9
This is the single biggest mistake every single emerging market has made in
the past. Overleveraging on dollars.

These countries need to realize that being in debt to a foreign currency is
never worth it. The short-term booming economy because of a market flooded
with dollars doesn't ever outweigh long-term costs.

See: Argentina, Brazil

~~~
qtplatypus
Many emerging markets don’t have enough capital to invest in infrastructure
and businesses in order to build there economies. When done responsibly it’s a
way to grow your economy.

------
ma2rten
Something that I have been wondering about for a long time. Why is it
considered to be a good thing to export more?

It seems to me that if a country imports more than it exports, it is getting a
good deal. It exports stuff and gets more stuff in return.

~~~
pascalxus
exporting more means you're earning relatively more money that can then be
spent on assets. All spending is either on assets (property, equities, land,
etc) or liabilities (cars, toys, clothes, etc). Assets are the key to wealth
because assets make more money whereas liabilities cost you to loose money.
Wealth begets more wealth because it grows based on compounding effects.

~~~
ma2rten
This makes sense for individuals, but how does this work for countries?

Let's say the US were to export more stuff to China. Now American companies
have more money to buy assets. If they use this money to buy assets in the US
it would just cause inflation. The land prices go up, but the total amount of
land owned stays the same. If they use the money to buy land in China, I am
not sure that it would have much impact on the US economy.

------
asabjorn
Financial tools such as devaluing their currency as a tool in maintaining a
non-reciprocal trading relationship demonstrates the challenges in working
with China. If your marital partner or friend did the same you would probably
be unhappy with them. For instance, giving you equal conditions in my market
assume that you will do the same in yours and that you will not unfairly
subsidize your businesses through market restrictions as well as financial
instruments such as currency manipulation.

------
apo
> Firstly, China has devalued the yuan to offset the rising tariffs that the
> United States has been imposing. In fact, China has devalued the yuan
> significantly since the Trump administration first placed a 10% tariff on
> Chinese goods – effectively negating the tariffs. And with the new 10%
> tariffs that Trump has promised to imposed on a wider range of goods China
> has in response devalued their currency further.

I keep seeing claims that China is devaluing without numbers or context.

Here's a 10-year chart of the USD/CNY exchange rate:

[https://www.xe.com/currencycharts/?from=USD&to=CNY&view=10Y](https://www.xe.com/currencycharts/?from=USD&to=CNY&view=10Y)

At the start of the current administration (Jan 2017), the rate stood at about
6.96. Today it stands at 7.04.

In the two years after the 2016 election (April 2018), the yuan had
strengthened to 6.28.

According to this timeline, the first round of US tariffs hit on April 7,
2017.

[https://www.reuters.com/article/us-usa-trade-china-
timeline/...](https://www.reuters.com/article/us-usa-trade-china-
timeline/timeline-key-dates-in-the-us-china-trade-war-idUSKCN1UZ24U)

From the announcement of the first round of tariffs, the yuan actually
strengthened. It has only "weakened" in the last year, and then only back to a
level that slightly exceeds that of Jan 2016.

Yet to hear the president and others tell it, China is on a currency
devaluation bender the likes of which the world has never seen. Well, I'm not
seeing it at least.

It seems that the 7.0 level was broadly seen as a line in the sand. But like
all psychological levels, they rarely mean anything in the long term.

The trend is clearly for more yuan weakness based on the chart alone. Perhaps
we'll even see even massive devaluation.

But so far that's just speculation. The chart tells a story of a massive bowl
formation (strongest yuan point in Jan 2014) hinting at severe weakness ahead,
but we're nowhere close to that at the moment.

------
1PlayerOne
"China bids up the price of the dollar relative to the yuan by buying dollars
with yuan, and then sits on these dollars by purchasing U.S. treasuries with
them"

Is China printing yuan to buy dollars? I thought the USD was accumulated from
payments (in dollars) from exports to the USA.

------
natpalmer1776
I see a lot of comments looking at this from a 'X vs Y' lens and are trying to
paint China/USA/Trump/Whoever as a bully, victim, or some other emotional
label. In this kind of situation, I think it is important to remember that
there are not any 'bullies' and 'victims'

Like most business, the rules of engagement are flexible dependent on those
involved and their willingness to assume risk to gain a nominal advantage.
Also like most businesses, the net outcome of increasing risk is not always in
favor of the party taking the risk, however the net outcome is almost always
in [someone's] favor. Thus, you can simplify the outcome of any risk into two
categories: Internal Advantage & External Advantage.

\-- Note: I don't use the term "disadvantage" as I prefer to force myself to
think of things from a advantage/standing perspective. Any loss on a
countries' part is a direct result of another country gaining some relative
advantage. "What is the inherent risk with Action [X], and who gains from it?"

Now regarding the issue at hand, the recent moves between China & the United
States:

China is responding to the United States assuming a greater degree of risk,
and corresponding reward, through recent tariff changes.

They appear to be trying to mitigate the advantage the United States gained by
their actions, and thus are responding as any rational party in this situation
would by attempting to regain their original advantage. The value of the
currencies is, while non-trivial from a macro-perspective, a non-issue
compared to re-establishing a status quo of commerce volume and relative
economic position.

The question that remains now is whether the net advantages of either nation
shifts as a result of this recent exchange.

------
mrb
« _…an undervalued currency, by raising the cost of imports, acts as a kind of
consumption tax for household and so reduces disposable household income. With
lower disposable household income usually comes lower household
consumption…the combination of lower consumption and higher production
automatically causes a surge in the savings rate.

And of course, this also acts as a subsidy to consumption for other countries
whose currencies can now purchase additional imports._»

The first paragraph is written by Michael Petteis. The second paragraph by the
blog's author. That second paragraph is completely wrong. As Michael explains,
an undervalued currency raises the cost of imports. Therefore it doesn't help
"purchase additional imports".

~~~
mediaman
An undervalued currency raises the cost of imports into the country whose
currency is undervalued.

For _other_ countries, it subsidizes imports from the country with the
undervalued currency.

He's not claiming that an undervalued currency helps that country purchase
additional imports.

~~~
mrb
Ah I see, this makes sense. Thanks. I misunderstood the second paragraph.

------
naveen99
no mention of how devaluing the currency affects or is affected by the
interest rate. china is lowering interest rates...

china's interest rate is still higher than than the us feds.

[https://www.cnn.com/2019/08/19/investing/china-interest-
rate...](https://www.cnn.com/2019/08/19/investing/china-interest-rate-
cut/index.html)

------
corl3onis
Excellent article. I wonder how this news will affect those worried about the
inverted yield curve?

------
known
Not a single word about OPEC Oil in this article :(

------
stcredzero
_Both Donald Trump and Elizabeth Warren want the dollar to be weaker because,
as we will see, a weaker currency will boost exports._

So, is this one way to summarize it: The lowlier a country's populace is on
the world stage, the better the balance of trade, and the more the country's
elites benefit? Of course, this isn't true 100% across the board. Make a
country's economy backwards enough, and its businesses will lose the ability
to compete in high margin value add goods.

------
KaoruAoiShiho
*rolls eyes.

To look at whether or not the yuan is being devalued stop looking at it vs
just the dollar but against all other currencies. The trade war is pushing up
the dollar significantly.

Today's value vs Aug 19th 2018.

Yuan vs Euro 0.13 vs 0.13

Yuan vs Pound sterling 0.11 vs 0.12

Yuan vs Yen 15.11 vs 16.06

Yuan vs Indian Rupee 10.15 vs 10.14

TLDR: Yuan is basically the same, rather it's the dollar that's gaining.

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JumpCrisscross
> _against all other currencies_

The correct method is a trade-weighted basket of currencies. So if you trade
90% with India and 10% with Japan, you weight the moves accordingly.

By this method, the renmimbi has devalued. Just not by as much as it appears
by just watching the dollar.

More critically, the Chinese government fixes the renmimbi-dollar trading
range. This gives this pair (among others) special status over others.

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KaoruAoiShiho
There are a number of measures. Looking at a chart you can see the trend
yourself instead of taking it from OP.

[https://imgur.com/a/5sZRJbW](https://imgur.com/a/5sZRJbW)

~~~
JumpCrisscross
REER is a domestically-scoped tool. It answers “should the currency move,” not
“has it been pushed?”

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tabtab
Re: _China devalued their currency to offset the U.S. tariffs. But China is
between a rock and a hard place. Tariffs risk severe damage to their fragile
economy if not offset with currency devaluation. But, with the enormous debt
burden the Chinese are now under, currency devaluation creates the real risk
of capital flight from the country - and makes it more difficult for China to
service it’s dollar denominated debt._

Trump knows that China is in a weaker position than the US. However, all this
gamesmanship (and gameswomanship) risks crashing _both_ economies (and the
world economy). Trump is willing to play chicken as long as the US has the
edge. But chicken is still a risky game. An interesting economic experiment is
underway. Unfortunately, we are the lab rats.

