China's slowing economy has been drawing questions about how it can maintain its export levels within the free market. In a move seemingly calculated to help boost exports, the People's Bank of China (PBoC) devalued its currency in early August, pushing shares and commodity prices lower. Stock markets reacted sharply, culminating in 'Black Monday', in which the Shanghai Composite Index fell by 8%, and, after another devaluation the next day, fell by 1.27% on the Wednesday. China is eager for its currency to be included in the International Monetary Fund (IMF)'s Special Drawing Rights (SDR) basket of currencies. In order to qualify for inclusion, the country must demonstrate that it is a major exporter, and that its currency is freely useable. These two conditions are not necessarily in accord, as the loosening of China's grip on its managed exchanged rate puts the yuan further at the mercy of the free market. This could potentially cause the yuan to strengthen, which would decrease its export competitiveness.
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