The People's Bank of China (PBOC) announced a 1.9 percent devaluation of the yuan reference rate in August 2015, marking the first adjustment in China's currency in over a decade. The devaluation was aimed at helping China transition its economy away from exports and outside influence to focus more on domestic consumer spending and economic growth. However, China's ambitious economic transition plan has left it vulnerable to external factors like the global financial crisis, slowing world economic growth, and monetary policies of other nations that have weakened the yuan. The devaluation may not have the same stabilizing effect on China's economy as in the past due to these challenges of the global economy.

1. SEPTEMBER 2015 | WWW.WISHESH.COM
WWW.WISHESH.COM | SEPTEMBER 2015
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Chinese
devaluation of
yuan, implications
and
IN BUSINESS IN BUSINESS
The PBOC announced a
1.9 percent devaluation
of the Yuan reference
rate
· An exchange
rate adjustment may
not prove the same
stabilizing effect as it had
20 years ago
Why Did China Devalue?
Under President Xi Jinping,
China has embarked on an
objective to transition its
economy from one dependent
on exports and outside
influence to one that finds
more expansion through
consumer spending and
other internal factors. This
directive has come hand-in-
hand with an effort to open
up the country’s financial
system to better secure its
place in the global economy
and to use the outlet to help
prevent systemic imbalances
that occur as a side effect of a
closed system.
The ambitious transition,
however, exposed China to
unforeseen developments
like the Great Financial
Crisis, moderation of global
economic activity in recent
years and the competitive
monetary policy efforts
adopted by other major
monetary policy authorities.
Major quantitative easing
progress adopted by various
central banks (Fed and BoE