On the RMB Devaluation

China’s move to weaken the RMB should not be seen as a devaluation against the dollar, as though the dollar were an objective benchmark. Rather, it is a liberation from the too-strong dollar, a salutary adjustment toward the valuations of the yen, the euro and the currencies of China’s other trading partners. Through the currency peg, China passively imports US monetary policy. The growth trajectories of the US and China are too divergent now for that peg to go unadjusted. Say what you will about China’s potential for a hard landing -- this move was the right thing to do.