, Columnist
Sinking Yuan Risks Dragging Down Banks
The currency's decline is a vicious circle that will eventually suck in lenders unless halted.
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Traditional theory says a cheaper currency should be good news for an export-dependent nation that's losing ground to lower-cost rivals. That doesn't apply in China's case, and its banks could be next to suffer the consequences.
Investors have good reason to worry as debt continues to explode and money keeps flowing out of the country. Goldman Sachs says a rising amount of capital is leaving China in yuan rather than dollars and the moves can't be explained by market-driven factors, Bloomberg News reported Tuesday. The same day, the People's Bank of China set the yuan fixing at the lowest since September 2010.