| > don't the Chinese want a devalued Yuan? It helps their economy, right? It helps some and hurts others. It helps when you are exporting and hurts when you are importing. But it gets complicated: Among the 'importers' are consumers. Devaluing the yuan raises prices for imported goods and services, and goods containing imported components. In a way, devaluation taxes consumers to help exporting businesses (but it's more complex: some consumers work for or otherwise do business with exporters, while some are connected similarly to importers). Also among the importers are businesses who import components of the products they make, including goods, software, and services. Those importers just saw an across-the-board increase in their costs. And there is import and export of debt. Those who owe money in another currency, usually US dollars, just saw an across-the-board increase in how much they owe. Those who are creditors in another currency just got an across-the-board bonus; however I suspect that most Chinese institutions would lend in their own currency. It also helps those importing assets; for example investors are more likely to put their money in China when they can buy yuan-denominated assets more cheaply. In a free-floating currency and open market, exchange rates also affect domestic interest rates because the exchange rates affect demand by foreign investors. I'm not sure how China's market works in that regard. In the end it's the government picking winners and losers, but if their economy or key sectors depend more heavily on exports than imports, certainly they could see a net gain. |