Yuan devaluation breaks last line of global economic defence, warns top economist

Stephen King of HSBC warns the world’s financial system may not survive another crisis without China as a backstop

China’s devaluation of the yuan reveals that the global economy will be without stabilisers if another crisis strikes, economists have warned.

The decision to cut the yuan’s value showed that Beijing had become scared, they said, suggesting that the world’s second-largest economy is in a far more precarious position than outsiders had assumed.

Stephen King, a senior economic adviser to HSBC, said that since the crisis China had done more than any other to provide “the heavy lifting to support global economic growth”, but that it may not step in to keep the world’s financial system afloat again.

A sharp correction in Chinese stocks – shaving up to 32pc from the value of equities traded on its largest index – was indicative of the country’s economic slowdown, it said.

Moody’s expects China’s GDP to rise by just 6.8pc this year, after years of growth in excess of 7pc. The agency expects growth to slow to 6pc a year by the end of the decade and that the slowdown will only be managed “thanks to significant policy support”.

An unexpected move last week by the People’s Bank of China (PBoC) to devalue the yuan – also known as the renminbi – unnerved financial markets and analysts alike, some of whom have suggested that policymakers are hoping to stabilise growth with an export-led push.

Full article: Yuan devaluation breaks last line of global economic defence, warns top economist (The Telegraph)

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