The International Monetary Fund has welcomed China’s devaluation of the Yuan due to their economic need for more exports. On August 11, 2015 the People’s Bank of China announced the move from a tightly controlled currency to one more controlled by market forces. The IMF has reiterated the need for China to move towards a more market based currency before China’s recent devaluation in a report published on July 7, 2015 they stated that a free-floating currency is
necessary for allowing the market to play a more decisive role in the economy, rebalancing toward consumption, and maintaining an independent monetary policy as the capital account opens
China recent move towards a more market based currency is clearly an attempt by the country’s government to boost exports after July’s export numbers tumbled 8.3%. When looking at numbers coming out of China, like July’s export statistics, it is important to remember that they are impossible to verify and are commonly believed the be at least a little manipulated. After the massive monetary policy shift from the People’s Bank of China one should assume that China’s economy is likely in worse shape than they are currently letting on.
Recently China’s economy became the biggest in the world and with these troubling numbers coming out of China investors should watch them like a hawk.
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