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. Continue reading