The Chinese stock market slump has had a significant effect on the whole world. To curb the crash, the country’s authorities had to intervene in the stock market and even halt trading. Nevertheless, all of these efforts failed to stabilize the situation. In an attempt to save the world’s second largest economy, the People’s Bank of China decided to suspend the national currency devaluation.
Most independent observers suppose that the panic on financial markets was provoked by the depreciation of China's national currency. To soothe the nerves of market participants, the Chinese central bank increased the yuan’s value for the first time this year by setting the official midpoint exchange rate at 6.5636 versus the US dollar. Thus, the yuan appreciated by 0.02% against its US counterpart. It is noteworthy that the free-market value of the renminbi was 6.5885 against the US dollar.
The alarming situation on the Chinese stock market may prove to be an acid test for the country's officials in terms of their professionalism and ability to make the right decisions under such dreadful conditions. Some economists believe that Beijing resorts to the yuan’s devaluation in order to support the national economy. However, such actions have provoked concerns over further competitive devaluation across the world's emerging markets.
