Tea Leaf Nation

This Map Shows the Global Impact of China’s Dramatic Currency Devaluation

Major equity markets are a sea of red in the wake of China's falling renminbi.

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The plunge in the value of China’s currency, the renminbi (RMB), is shaking world markets, and almost no major index is untouched by the ripple effect.

On Aug. 11, the People’s Bank of China, the country’s central bank, allowed the RMB to descend further and faster than at any time since 1994. Monetary authorities insisted the Aug. 11 drop, which caused the RMB to fall by 1.9 percent against the U.S. dollar, would be neither “persistent” nor “substantial,” but the RMB’s value has taken a further dive in subsequent days. The currency has fallen because traders on the free market appeared to believe the RMB was overvalued and that Chinese authorities were determined to let the market have a bigger say in its valuation. The move also makes Chinese exports cheaper, a competitive advantage for China that arrives at a convenient time, when domestic equities have taken a beating and the country’s massive economy shows signs of further stalling.

Analysts have been fretting for weeks about what they have called a global economic “contagion” stemming from China’s slowdown. The drop in China’s RMB could be a possible domino leading to retrenchment elsewhere: since Aug. 11, the flagship equity indices of 18 of the world’s major economies have almost all taken a hit, with the most notable exception being mainland China’s Shanghai Composite Index, which is currently subject to substantial central government meddling. Below, an interactive map suggests the extent to which global equity markets have suffered in the wake of China’s big move. Red indicates a loss; the deeper the red, the more severe it has been. Click on any covered country for data:

To be sure, China’s recent devaluation is not responsible for all market activity since. But it has “introduced more volatility” into the currency, according to Damien Ma, a Fellow at the Paulson Institute, constituting “new territory” to which markets elsewhere will need to adjust, assuming China’s central bank stays the course. “A more market-driven RMB means tolerating more two-way volatility,” where the currency could go down or up, Ma told Foreign Policy. “And that’s not necessarily a bad thing.”

Update, Aug. 13: This article has been updated with a quote from Damien Ma. 

Editor’s note, Aug. 14: This post has been updated to include more current prices and to incorporate the major indices for Mexico and Taiwan. An earlier version of this map treated Taiwan’s index as part of mainland China’s Shanghai Composite Index due to automated geotagging in Google Maps, which powers this map. However, Taiwan, a self-governing island that China considers a rogue province, has its own equity index.

Correction, Aug. 14: China’s Shanghai composite index has risen by 0.93% since Aug. 11. An earlier version of this article provided a change dating to Aug. 10, the day before China announced its RMB devaluation. 

David Wertime is a senior editor at Foreign Policy, where he manages its China section, Tea Leaf Nation. In 2011, he co-founded Tea Leaf Nation as a private company translating and analyzing Chinese social media, which the FP Group acquired in September 2013. David has since created two new miniseries and launched FP’s Chinese-language service. His culture-bridging work has been profiled in books including The Athena Doctrine and Digital Cosmopolitans and magazines including Psychology Today. David frequently discusses China on television and radio and has testified before the U.S.-China Economic and Security Review Commission. In his spare time, David is an avid marathon runner, a kitchen volunteer at So Others Might Eat, and an expert mentor at 1776, a Washington, D.C.-based incubator and seed fund. Originally from Jenkintown, Pennsylvania, David is a proud returned Peace Corps volunteer. He holds an English degree from Yale University and a law degree from Harvard University.

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