The Chinese renminbi continues to dive heading towards its historical lows. Currency analysts expect the yuan to fall by 7.5% in late 2016, or 15% compared to the current exchange rate. However, the devaluation of the Chinese national currency is part of the regulator’s policy in contrast to the weakening Russian ruble, which is a disaster caused by Western sanctions and slumping crude prices. China’s authorities took this step being aware of possible outcomes. Temporary stability of the currency is nothing in comparison with steady recovery of the economic growth. The Chinese renminbi has already declined to the level of 6.3628 against the US dollar; however China targets an even lower exchange rate. This is not surprising since a sustainable increase in the yuan over the last ten years became the major reason behind diminished liquidity reducing a competitive advantage of China's exports. Thus, you can currently get more than 16 US dollar for 100 yuans, while it was worth 12 US dollars in 2005. The situation did not favor a rise in exports, but some economists believe that policymakers strived for another goal, which was balance. China had long-kept tight control of the yuan value, which implied that the currency exchange rate was not based on global market developments. That resulted in the so-called US dollar strain. In case China’s financial system suffers worse problems than experts believe and the regulator fails to achieve the much-needed result with the help of devaluation, the global economy will face challenging times. China, which used to drive the world economic growth, will hardly be able to play this role in the future.
