Sometimes the mountain peak is clearer from the valley than from the summit. It may be easier to understand the changes in China’s currency regime if we take a step away and try to look at the big picture. To find our path we need to clear away some undergrowth that is distracting us from rigorous analysis.
With China’s economy slowing and exports weak, a devaluation could be a way to restore economic vigor. Many accounts in the western financial press tried placing the depreciation of the yuan in this context, but it is mistaken.