The yuan dropped at the fastest pace in almost two years last week and is now 1.8pc lower against a basket of currencies than in June, when Beijing announced the end to its fixed peg against the dollar.
Western economists had seen yuan liberalisation as a sign that China is abandoning its mercantilist policy in a step-by-step move towards a floating currency, which was expected to rise. They misjudged China’s motives badly.
