- The Chinese economy is faced with a very tricky adjustment problem.
- We think the path of least resistance is a yuan depreciation.
- This has been ongoing for quite some time already, markets panicked only when it seemed to accelerate.
- While this is still very much possible, for now the PBoC has things seemingly under control.
- But when this continues, markets might very well start to worry even when the depreciation is gradual and orderly.