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China’s savers are losing confidence in the yuan and that is going to continue to drive a flow of Chinese wealth out of the country, potentially creating bubbles in overinflated assets elsewhere, warn economists.

Thursday once again saw the Shanghai stock market crash seven per cent before a circuit-breaker was triggered, following one of the biggest downward adjustments to the yuan since August. The currency is fixed to the U.S. dollar and the People’s Bank of China has spent much of the past year gradually lowering its value against the greenback. Economists speculate the move is an attempt at competitive devaluation as the Chinese economy continues to show signs of slowing growth.

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Thursday’s stock market crash can essentially be labelled a currency panic, as the unexplained lowering of the yuan has shaken investor confidence. It has also created concerns that China’s neighbours will be forced to engage in their own competitive devaluation to keep their exports competitive, worsening regional instability.