In guiding the renminbi into its steepest dive since 2005 this week, Beijing was employing a strategy of “one arrow, two vultures”, as the saying goes.
The first vulture denotes the international speculators who have – in spite of warnings by Chinese officials – regarded renminbi appreciation against the US dollar as a one-way bet. The second vulture signifies the domestic shadow financiers who refuse to be brought down to earth.
Neither of Beijing’s avian quarries is dead or even mortally wounded, but the renminbi’s surprise decline will have ruffled plenty of feathers. More importantly, it serves notice that China is opening up a new front in its battle to reduce risks in a highly volatile financial system.
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