Global stocks are selling off on Wednesday and U.S. stock futures are pointing to another day of selling after China’s central bank on Wednesday devalued the yuan 1.6 percent lower than the previous day in a move to weaken their currency and make Chinese products more competitive across international markets amid signs of an economic slowdown in the world’s second largest economy.
The yuan fell to a four year low on Wednesday.
Heavy trading losses have been seen across export and commodity based companies that are exposed to China.
A spokesman from the China’s central bank acknowledged that the reason for devaluing the yuan again was due to weak economic data in July and to make the currency more market oriented towards a equilibrium market rate.
“The main reason is that market makers make quotations based on the analysis of financial data of July newly released on 11 August and the announcement of improving central parity quotation of RMB exchange rate against US dollar on the same day” said a spokesman from the People’s Bank of China in a released statement.
The spokesman added that there are no long term plans to devalue the yuan.
“In view of both domestic and international economic and financial condition, currently there is no basis for persistently depreciation of RMB” the official said before adding later that “China will continue to pursue prudent monetary policy.”
The policy move to devalue China’s currency by 1.9 percent yesterday sparked widespread criticism from U.S. lawmakers and business executives who export goods and materials to China.
Next month Chinese President Xi Jinping will arrive in Washington D.C. for a state visit with President Obama and then attend several events in New York commemorating the 70th anniversary of the United Nations.