At least the headline writers and Twitter wags enjoyed themselves during yesterday’s global financial panic. There was a “Black Monday” tag everywhere you looked, while “The Great Fall of China” (pun intended) was also popular. My personal favourite headline appeared in the print edition of India’s Economic Times: “Don Yuan Causes Heartbreak.”
Oh, has he ever. Trillions of dollars of wealth have been erased since the People’s Bank of China (PBoC) devalued the yuan two weeks ago. The central bank’s move was entirely justifiable. The Chinese economy had been slowing for months, but the country’s currency continued to appreciate as the PBoC sold billions of dollars to buoy the yuan’s value—a gesture few seemed to appreciate. As China’s economy continued to slow, and international investors continued to book profits on their way to the exits, PBoC Governor Zhou Xiaochuan bailed on a losing strategy. That’s what any responsible central banker would have done. What Zhou failed to take into account was that he hasn’t proved himself a responsible central banker.
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