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Yuan Seen Needing Bigger Depreciation for China to Reap Benefits

  • Currency must fall another 14% to spur 0.7 points of growth
  • Risk is that debasing the yuan can lead to capital outflows
Bloomberg business news

What's Driving the Chinese Currency?

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The yuan, which has fallen 5 percent since China’s central bank devalued the currency in August, probably needs to fall an additional 14 percent if the nation’s economy is to see any real benefits.

A decline to 7.7 per dollar, from about 6.6, is needed to boost gross domestic product expansion by 0.7 percentage point, according to estimates by Bloomberg Intelligence Economics. The move, a scenario which none of the analysts in Bloomberg surveys expects, would lead to $670 billion in capital outflows.