Slow growth may lead to government-led yuan devaluation

The continued appreciation of the yuan is likely to lead to an engineered “mini devaluation” to spur economic growth, Bloomberg reported, citing banking and financial services company BNP Paribas. The Westpac trade-weighted index for the yuan has fluctuated inversely with China’s GDP since at least 1995, so with the current economic slowdown it would make sense for the government to intervene to promote growth. The People’s Bank of China has already done so significantly this year, buying enough dollars in the first quarter to weaken the yuan by 2.6%, but the currency continued to appreciate in the second and third quarters.