Where Does The US-Chinese Turmoil Leave Europe?

Where Does The US-Chinese Turmoil Leave Europe? by Dan Steinbock, Difference Group

About a week before last Friday, the People’s Bank of China (PBoC) adjusted the exchange-rate of the Chinese yuan against the US dollar to better reflect market conditions. The net effect was a devaluation of 1.9 percent relative to the dollar.

Critics saw the PBoC’s adjustment as still another signal that the slowdown of Chinese growth is worse than anticipated.

However, that slowdown simply reflects the shift of China’s growth model from investment and exports to consumption and innovation. This shift will take another decade.

Others argued that China’s devaluation was the opening shot in a “currency war” that would spread internationally. In reality, jumpstarting exports and growth tends...