Thursday, July 5, 2018

The RMB had been on the sidelines of growing trade tensions, but its recent weakness is raising fears of competitive devaluation. We continue to think a competitive devaluation scenario is unlikely because a sharp depreciation could reignite speculative capital outflows, which would be counterproductive by tightening financial conditions. Instead, we see recent RMB weakness as a reversal of excess strength, with perhaps a side-signal that recent trade tensions are unwelcome.

IIF Authors

Robin Brooks

Robin
Brooks
Managing Director and Chief Economist
@RobinBrooksIIF
rbrooks@iif.com

Gene Ma

Gene
Ma
Head of China Research
202-857-3305
gma@iif.com

Tariq Khan

Tariq
Khan
Research Analyst
+1 202 857 3339
tkhan@iif.com

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