The yuan and market-media mass hysteria

RARELY has a reaction been so disproportionate in relation to the precipitating event as the response by markets and much of the international media to China's modest devaluation of the yuan this week. It has verged, as one seasoned investment banker put it, on the hysterical.

Foreign-exchange market dealers and stockmarket investors can perhaps be excused for their initial knee-jerk reaction to Tuesday's move by the People's Bank of China (PBOC) to devalue the yuan by 1.9 per cent against the dollar. These are, after all, nervous times in financial markets.

But it is a real indictment of most media in that it not only overplayed the supposed drama of the event, but also failed to put the yuan devaluation into any kind of objective context. There appeared to be a concerted attempt to demonise or even victimise China.