The managed devaluation of the Chinese Yuan last week has been the biggest story to occupy the markets since the Greek hiatus and is, arguably, now the new worry for us to contend with.
We are all aware of the challenges Chinese domestic investors have faced in the last few months as their equity market has gyrated around and the central authorities have attempted to control the volatility.
Biggest worry
Devaluing the currency is supportive of that goal and sure enough the Chinese market did benefit. However, the bigger external worry is what it says about the state of the Chinese economy as devaluing is a significant action to take and is likely to be driven by a need to stabilise the equity market.
The official Chinese gross domestic product (GDP) numbers always come in as forecast (currently 7%), they also are always released within two weeks of the quarter end and are never subject to revision.
Humble-pie announcements
The Chinese statisticians are clearly considerably more gifted than most as they manage to get it right every time, in a fraction of the time it takes elsewhere, in an economy that is bigger than all but the US and significantly more difficult to measure due to technological inferiority.
In the democratic economies elsewhere, we have three attempts at measuring GDP and it takes a whole quarter before the final number is signed off.
Even then, as occurred in the credit crunch, we sometimes get humble-pie announcements several years later, hence where further adjustments are made. In this case revealing that the true extent of the hit to UK GDP from the bursting of the credit bubble was not as severe as first thought.
