In a move with repercussions for the global economy and especially for investors, whose ranks have been rising thanks to cheap online trading, China’s Reserve Bank pushed the Yuan lower by 3% on August 11th and continued till the 13th
Here’s everything you need to know on the subject:
The People’s Bank of China increased the supply of the currency. An increase in supply when demand remains constant leads to a fall in prices. Economics 101.
This is a part of a series on China’s current situation. The first post, on the Yuan devaluation can be found here. The next post on the series is on the latest Market crash.
Over the past decade, China has emerged as the second largest economy in the world, the world’s factory and the largest consumer for several commodities. The age-old adage- When the US sneezes, the whole world catches a cold can now easily be applied to China.
And on August 11th, China sneezed. It continued sneezing for the next three days, causing all sorts of worry and activity amongst the other economies.
We are referring, of course, to the Yuan devaluation. While the devaluation was just about 3%, here’s the impact it will have on the rest of the world
a) Cheaper Commodities: China’s voracious appetite for commodities meant that several economies, notably Australia, began using Yuan for transacting with China. Now that Yuan has been devalued, China will now be able to buy commodities for a lesser rate.