A sharp drop in the value of the yuan appears imminent, even though its international prestige has been heightened with a decision by the International Monetary Fund to include the Chinese currency in the basket of currencies constituting the special drawing rights. A dreadful slump affecting China's export-oriented industries has accelerated selling of the yuan on the exchange market while doubts have been cast on Beijing's ability to shore up the currency.
A rapid fall in the yuan's value could further exacerbate the Chinese people's purchasing power and deal a serious blow to a global economy already being shaken by slowdowns in many emerging economies.
Last month, money dealers throughout the world started feeling uneasy as the People's Bank of China, over the course of several days, lowered the yuan's standard exchange rate against the dollar to the lowest level in 4½ years.