Depending on whom you ask, China’s move to let its currency depreciate is either a milestone for market reform or a sharp escalation of a currency war waged by government planners desperate to rescue a sputtering economy.
China’s central bank has done its best to support the first interpretation. In addition to pre-empting accusations of competitive devaluation, this framing strengthens the case that a more flexible renminbi deserves the International Monetary Fund’s endorsement as an official reserve currency.
Critics counter that China’s appeal to market forces is opportunistic. The Communist party likes to unleash market forces when they happen to align with its policy goals, they say, but will quickly revert to daily intervention when conditions shift.