It's fair to say that Brexit and the rally in oil prices have dominated headlines for a while causing a disruption in the coverage on matters relating to China although it must also be said that a number of changes implemented by the Chinese government in terms of a lessening of financial market regulation have gradually been taking shape with the installment of a new Chinese Securities Regulatory Commission's chairman Liu Shiyu.
What we've seen evolve since Shiyu's appointment is a steadiness in the depreciation of the Chinese yuan against the dollar that eclipses the abrupt and sharp devaluation that took place in August last year that sent shockwaves through global markets.
The stark difference between the two events comes down to the fact that Shiyu has allowed the free market to decide an appropriate equilibrium whereas his predecessor, Xiao Gang, liberalised the market far too quickly that by the time it came to regulate the necessary parts in the market, participants saw this as signs of fear from the government.
#China Onshore Yuan drops to 5.5yr low. pic.twitter.com/BGlT2q6YMz— Holger Zschaepitz (@Schuldensuehner) June 28, 2016
Working hand in hand with the People's Bank of China (more commonly known as the PBOC) the CSRC has coordinated a greater certainty in policy going forward and in doing so has indirectly cooled down market fears from the height they had reached late last year.
This is yet another positive improvement stemming out from Chinese financial markets that will allow their securities to be included into global investment funds, thus broadening the diversification of investors in China.
However as much as China needs to be applauded with its efforts to align its own financial markets to a global benchmark, the actual depreciation of the yuan begins to tell a worrisome story of the future that'll have a profound impact on the global economy.
It says to us that foreign investors don't perceive a strong bounce in economic activity anytime soon indicated by the level of outflows that have exited the financial system this year alone. In the short term it may pull the brakes on the economy but over the long term it would certainly stimulate exports from China again.
Whether developed nations, who are suffering from severe currency appreciation, take kindly to this is another question altogether and will probably cause fingers to be pointed, increasing the chances of the world seeing a resurgence of currency wars.
Exclusive: China to tolerate weaker yuan, wary of trade partners' reaction - sources https://t.co/rVYUP3BnvT pic.twitter.com/10xVNrxSkj— Reuters Top News (@Reuters) June 30, 2016
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