China & the Submerging Economies

EPA/JEROME FAVRE

Pedestrians walk past a sign for a money exchange in Tsim Sha Tsui district, Hong Kong, China, 13 August 2015. China's central bank on 13 August 2015, devalued the yuan for the third time in three days, to aid a slowing economy. The People's Bank of China unexpectedly adjusted its daily reference exchange rate by a further 1.1 percent, setting it at 6.4010 to the US dollar. On 13 August the bank cut the rate by 1.9 percent, followed by a 1.6 percent drop on a day earlier. The central bank has yet to confirm the 12 August adjustment, but the change was listed on the website of the official China Foreign Exchange Trade System.

Who suffers from the yuan’s devaluation: commodity driven economies and major trading partners are directly affected in terms of exchange rates, stock markets, and tumbling prices for key commodities


China led growth is matched by China driven recession.

In the Pacific, Latin America, Central Asia, and Africa, emerging economies focused on commodity exports are taking a combined hit from Chinese yuan devaluation and USD appreciation. The emerging market crisis is now gaining momentum and the emerging economies are now submerging.

Short term prospects

The combined pressure of Chinese devaluation and a rally in the US dollar builds up pressure for emerging economies.

Last week’s 2%...


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