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Bet On Emerging Consumer, Not Chinese Devaluation

Don’t expect the Chinese government to sharply devalue their currency anytime soon, even if it would help stimulate their slowing economy, according to one analyst.

Don’t expect the Chinese government to sharply devalue their currency anytime soon, even if it would help stimulate their slowing economy, said Greg Woodard, senior analyst at Manning & Napier. 'The Chinese government knows that a sharp devaluation of the renminbi would not be well-accepted by foreign governments, and would also be seen as a sign of potential instability,' said Woodard. 'This would conflict with their efforts over several decades to cultivate the image of being a stable, responsible global economic power and would make it much more expensive to service their dollar-denominated debt.' As a result, Woodard predicted that a sharp and uncontrollable currency devaluation would not serve the government’s political or financial interests, even though it would act to spur the economy given China’s position as the world’s largest exporter.

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