True, the Yuan’s depreciation in the last 3 days, about 3.3% , is a big change since the policy of peg to the US dollar adopted by the Bank of China around 2005. But is it really a surprise? A quick look at the graph below, which depicts the chinese current account surplus as a percentage of GDP (blue line, left scale) and the real effective exchange rate (red line, right scale, up=appreciation) reveals that, since 2008, the Yuan appreciated massively, by about 25%, and the current accout fell dramatically, by about 7 point of GDP. The real surprise is that markets were surprised about the Yuan depreciation! The other surprise is that, so far , the Yuan has depreciated so little-so late!
