What's going on?

China made it easier for investors to sell its currency over the weekend (tweet this) � and, on Monday, investors reacted by sending the yuan down 0.5% versus the US dollar (it may not sound like it, but that�s a big move for the yuan).

What does this mean?

In the 18 months or so leading up to the beginning of 2017, China�s currency � the yuan � fell quite sharply versus the US dollar. In order to stop it from falling so much that it would create huge uncertainty and hurt the Chinese economy, the Chinese government began buying its own currency (using US dollars that it keeps in savings). However, it was spending so many of its dollars on buying its own currency that, in an effort to limit the amount of yuan it had to buy, it also enacted measures to make it harder for companies and investors to sell the yuan. Its efforts appear to be working: so far this year, the yuan has increased by almost 7% versus the dollar.

Why should I care?

The bigger picture: China is now wary of its currency going up too much!

A rising currency value creates a headwind for an economy, partly by making exports more expensive (and China exports a lot of stuff). By making it easier to sell the yuan, China is perhaps hoping to stem the rise of its own currency in order to protect its economy.


For the market: Chinese companies could, once again, go on an international buying spree.

2016 was the biggest year ever for Chinese acquisitions of foreign companies. But when a Chinese company buys a foreign one, it must move lots of money outside of China. As part of its efforts to halt the selling of the yuan, late last year the government put strict restrictions on Chinese companies buying foreign ones. According to The Wall Street Journal, China will soon remove those restrictions � meaning Chinese companies could once again be active buyers of public western companies.