What are we to make of Beijing’s shock devaluation? With the UK media classes fixated on Jeremy Corbyn, a potential Labour leader even his supporters acknowledge won’t ever be Prime Minister, you may not have clocked recent events in the People’s Republic. The actions of the Central Bank of China, though, and the near-term path of the yuan, could have a big impact on UK living standards.
Having grown 9.8pc a year since the late-1970s, the Chinese economy now outstrips America on a purchasing power parity basis (adjusted for living standards). With the big Western economies still shaky, if this Eastern giant stalls, the UK’s nascent recovery could easily reverse. And if Chinese stocks and bonds crash, with “contagion” spreading to financial markets elsewhere, that would upend British politics.