The Dow Jones Industrial Average plunged more than 250 points in intraday trading Tuesday after Chinese officials made the unexpected move of devaluing the country’s currency by almost 2% against the dollar. The move marked the largest drop for China’s heavily-controlled currency since 1994, according to Reuters.
China’s move is being seen as an attempt to shore up the country’s flagging economic growth by making exports cheaper. But the depreciation has impacts far beyond China, too. Some analysts worry other central banks may be forced to devalue their currency to remain competitive on global markets. And a cheaper renminbi will make business harder for global companies that export to China.
“What is good for growth in China is unfortunately bad for everybody else,” Bill McQuaker, co-head of multi-asset at Henderson Global Investors, told Reuters.
American politicians have complained for years that China manipulates its currency to maintain an unfair advantage in global trade. The depreciation will only add fuel that that criticism. But according to the Washington Post, it’s not clear whether China’s currency is over- or under-valued. The U.S. Treasury Department said in April that the renminbi was “significant undervalued,” but a month later, the International Monetary Fund said the currency was valued accurately.