In recent weeks the focus has switched somewhat dramatically away from Europe and, in particular Greece, to China. The latter’s slowing economy and crashing stock market has resulted in direct government intervention, including devaluing the yuan (renminbi) four times in the space of as many days last week.
Quite what further effect the economic situation in China will have on the rest of the world remains to be seen. Is the downturn in the commodity cycle, if it can still be called that, now going to be far more prolonged? Some observers are even suggesting that lower commodity prices will be with us for quite some time which doesn’t augur well for many emerging economies. What effect will China’s devaluing currency have on the US Fed’s decision to raise interest rates as soon as next month? Will this decision now be postponed until next year or will they go ahead anyway? Is this the start once again of so-called “currency wars” although many feel that China’s currency has merely been rebalanced?