China Actually Has Two Currencies—And It’s Fiddling Around With Both

 

The problem with micromanaging the economy is that things become rather complicated. That’s why China needs two currencies, one for the mainland, one for international banks. Since the devaluation on August 11, it seems China is losing control of both.

The Renminbi (RMB) or yuan is used within mainland China and can be exchanged for other currencies very restrictively. It is primarily used in trade but also for tightly regulated inbound and outbound investments.

There is no real market for this exchange rate, instead the People’s Bank of China (PBOC) comes up with a fix every day and then trades around it.

China’s stock-market collapse is not over yet

The collapse in China’s stock market is far from over despite the Shanghai Composite Index having fallen nearly 30% in about a month and experts are urging investors to bail out while there is time.

“We continue to advise investors to consider not holding individual positions in Chinese stocks but advocate for fully diversified exposure to emerging-market equities,” Peter Donisanu global research analyst at Wells Fargo Investment Institute said in a report to investors.