The double-devaluation of its currency, the Yuan, by around 4 percent over a span of three days by the Chinese government shook the global currency and financial markets, while pushing the Indian Rupee to a two-year low of Rs 65 to a dollar. The Chinese devaluation came in the wake of the slowing down of the Chinese economy – the world’s biggest exporter – mainly due to an abrupt decline in exports on account of the ongoing global slump and reduction in US wage rate, the latter making exports from China costly and domestic production relatively cheap in America. Despite the People’s Bank of China denying the scope of a global currency war brought about by the devaluation of the Chinese currency, the step will prompt countries to resort to competitive devaluations to preserve their export share. The whole scenario should be evaluated as a systemic collapse of the exploitative economic and financial structure built by imperialism today.
India, a cheap-labour based export-oriented economy, is one of the hardest hit as the cheapening of Chinese exports consequent to devaluation will cut into India’s meagre export markets abroad on the one hand, and intensively penetrate into its domestic market on the other, since Indian goods are uncompetitive compared to those of China. The sudden depreciation of the Indian Rupee arising from reduced export earnings and from pressure on the foreign exchange reserves explain only part of the vulnerability of India. Panic arising from Chinese action and the resulting shock waves on global currency, stock and commodity markets will have far-reaching impact on the Indian economy, which following its two-and-a-half decades of neoliberal policies, has been fully integrated and intertwined with the global markets. The present Chinese move to maintain its export markets and its aftershocks have once again shattered all the illusions that the Chinese growth engine will compensate for the global meltdown since 2008.
The vicious circle of stagnation and slump and ever-mounting social repercussions confronting humanity today can be resolved only through a fundamental restructuring of the international economy and national state systems through an alternative development paradigm based on an ideological-political clarity