Ambrose Evans-Pritchard: World faces deflation shock as China devalues faster

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By Ambrose Evans-Pritchard
The Telegraph, London
Thursday, July 7, 2016

China has abandoned a solemn pledge to keep its exchange rate stable and is carrying out a systematic devaluation of the yuan, sending a powerful deflationary impulse through a global economy already caught in a 1930s trap.

The country’s currency basket has been sliding at an annual pace of 12pc since the start of the year. This has picked up sharply since the Brexit vote, suggesting that the People’s Bank may be taking advantage of the distraction to push through a sharper devaluation.

"This makes a mockery of the PBOC's suggestion that its policy is to keep the currency’s value stable," said Mark Williams, chief China economist at Capital Economics. "Markets will not take PBOC policy statements at face value in the future."

Mr Williams said it is unclear whether Beijing intended to deceive investors all along when it gave categorical assurances earlier this year, or whether it is feeding on events. ...

... For the remainder of the report:

http://www.telegraph.co.uk/business/2016/07/07/world-faces-deflation-sho...



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