China weakens its currency
The Chinese Central Bank devalued the yuan today, Thursday, for the third day in a row. Stock markets around the world reacted to the devaluation with falling share prices. Commentators fear the Eurozone economy will be infected by the Chinese flu and warn the West not to lose its nerve.
Danger for Europe's economy
The devaluation of the yuan could also threaten Europe's economic recovery, warns the conservative Frankfurter Allgemeine Zeitung: "The huge drop in the price of German shares that depend deeply on China comes as a warning signal. Two small devaluations of the Chinese currency have been enough to send shock waves across the world's stock exchanges. Suddenly Europe is torn out of its Eurocentrism and made to see that not everything in the world revolves around Greece. A shock from Asia could strangle the tentative recovery of the European economy. Even Germany's supposedly so robust economy is under threat. The devaluation in Beijing is hopefully not the beginning of a global devaluation race, which as we know can only create losers. But perhaps the Communist Central Committee now wants to export some of its problems to the rest of the world after China has been driving the global economy since the financial crisis with its gigantic growth programmes."
Global economy could take a dive
Far-reaching consequences are to be feared from the current and future devaluations of the Chinese currency, the conservative daily El Mundo warns: "The move could be passed off as a mere sniffle. But certain factors point to a further devaluation of the yuan in the days to come. And then the entire global economy could be infected and come down with a bad case of the flu. The first symptom could be a regional currency war. The currencies of key export nations like Japan, Taiwan and South Korea are already feeling the effects of the devaluation of their giant neighbour. And in Europe the devaluation will negatively influence the already weak upturn after the worst crisis in decades. Indeed it's already regarded as likely that the Fed will postpone the interest rise expected for September. Even though Mario Draghi had been rubbing his hands at the thought of the benefits such a hike would have on the competitiveness of the euro."
West must react prudently
Nervousness is growing on the stock markets but the West must keep its cool with China's new monetary policy, the liberal daily Corriere del Ticino warns: "China is not only the second strongest global economy but also the country that most influences the prices of raw materials and industrial goods. So it's only to be expected that the decline in growth and the devaluation of the yuan will set off a deflationary wave. ... The Western economies will feel the consequences. Beijing's monetary policy will further weaken the already anaemic European upswing, which was primarily based on the devaluation of the euro. At the same time America will postpone the overdue rise in interest rates. In addition a rash and disparate reaction on the part of the Western countries could set off a chain reaction with incalculable consequences. We can only hope it won't end in currency sparring, because that could be a source of tension extending far the trade sector."
Devaluation to make yuan a global currency
The monetary policy of the People's Republic of China seeks to do more than merely stimulate the economy, the Catholic daily La Croix surmises: "Does the rupture with the strong dollar only serve the immediate economic situation, or is it part of a policy that seeks in the next few years to establish the yuan as a true international currency which circulates freely and is fully convertible? The yuan is already used as a reserve currency and payment resource in several African countries. And just at the start of August China signed a deal with Angola to make the yuan the second legal currency in the African country with the second-highest GDP. Beijing can no longer act as if these monetary ties did not exist. The internationalisation of the yuan is currently one of the best guarantees against a new currency war."