In a recent piece for the financial times, gerard lyons, a british economist who sits on the board of the bank of china (uk), argued that china’s currency, the renminbi, is undervalued, and that by encouraging it to appreciate, china would help raise its international profile. There are two primary interpretations of china’s move The first is that it constitutes a deliberate, if limited, devaluation Amid sluggish growth, weak domestic demand, and persistent deflationary pressure, a softer currency can provide a modest boost to exports and support manufacturers competing in global markets. China has been a persistent outlier here, combining unusually high levels of investment with even higher domestic savings rates and an ongoing surplus. China may devalue its currency, the yuan, to offset us tariffs, which could ignite a global currency war and exacerbate fears of capital outflow from emerging markets.
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