The devaluation of the yuan was right, argues economist Arthur Kroeber, according to the Washington Post. But the timing was most unfortunately, leading to the – wrong – conclusion the central government was taking panic measures.
The Washington Post:
Arthur Kroeber, managing director at Gavekal Dragonomics, said this week’s move to a market-driven exchange rate would be good for China and the world in the long term, supporting the government’s efforts to reform its economy and its intention to give markets a “decisive role” in allocating resources.
But the timing is problematic, he wrote in a note on Wednesday.
“The currency is being let off the leash right at the moment when market sentiment on China is pessimistic because of a continuing economic slowdown, an increase in private capital outflows, and entrenched producer price deflation,” he wrote. “Market confidence was also shaken by the authorities’ clumsy intervention to prop up the stock market after the popping of the equity bubble in June.”
“In this context it is no surprise that many traders and analysts have interpreted the currency move — wrongly, in our view — as a last throw of the dice by a government panicking about an economy in free-fall.”
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