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Will China’s currency crash the global economy?

First published:, 12/01/2016

As much as $1 trillion has left the country—and the pressure is mounting

It has fallen about 1 per cent since the beginning of the year, it’s about 2 per cent lower than after a wobble last summer and about 5.5 per cent lower compared with the weeks before that. Most people wouldn’t blink if this was anything but the Chinese currency. But the Yuan has become “hot” again in financial markets, partly because of mounting concern that it might tip the world economy into another global recession.

How could that be, you might ask, if it has moved so little, and especially since the People’s Bank of China, the Chinese central bank, maintains a tight grip on the currency market and on capital flows in—and especially out of—China. As if to prove the point, the central bank intervened in the so-called offshore market in Yuan, known as the CNH market, to stabilise the falling currency by pushing overnight interest rates up to over 13 per cent on Monday, and 68 per cent today. People who had “shorted” the currency would have been well and truly squeezed into submission. For the first time since late last summer, the wide difference between the CNH rate and the on-shore rate, called CNY, was eliminated. Anyone who still believes the Chinese currency system is gradually being liberalised needs to take another look at what just happened….Read more: