Charts of the Day: China’s 2015 ‘Devaluation’

About 2%.

That is how much China devalued the yuan by 10 years ago today, in what headlines at the time deemed a massive move. But what it really was, as we wrote then, was not an active, deliberate devaluation. Rather, it was Chinese officials’ ceasing to prop the yuan up and implementing a more market-oriented approach to currency valuation. There are two lessons from this ancient history that remain relevant today, so let us take a trip down memory lane.

We won’t painstakingly recap everything that happened a decade ago. Nor Chinese currency policy history. Here is the CliffsNotes version: The Chinese government stopped linking the dollar to the yuan publicly in 2005, instead indexing it to a basket of currencies. However, the country unofficially re-pegged the yuan to the buck during and immediately after 2008’s financial crisis. They dropped this in 2010, and the yuan irregularly appreciated through 2015, when downward pressure on it began. For a time, officials propped the yuan up. But on August 11, 2015, they stopped. Boom, devaluation.

The People’s Bank of China also unveiled a new exchange rate setting methodology that day. From 2005 to 2015, the bank would set a daily rate and allow the yuan to strengthen or weaken against the currency basket by 2%. The next day, it would set another daily rate—which may not be where it closed the day prior. After 2015, it retained the 2% bandwidth—but set the opening rate in line with the prior close. This seemingly small, market-oriented reform has led to much more normal-looking, sine-wave forex trading between the dollar and yuan.

Exhibit 1: Two Decades of Yuan-Dollar Exchange Rates

Source: FactSet, as of 8/11/2025. The yuan is strengthening when the line is falling.

At the time, pundits spilled many, many pixels decrying China’s move as a “shot” in a “currency war”—an effort to make China’s exports artificially cheap globally and thereby steal growth from the west. The decade since hasn’t been kind to those theories, though. China’s economic growth continued slowing even to this day. COVID lockdowns notwithstanding, America has been in expansion.

Beyond this, the reform was market-oriented enough to persuade IMF officials to include the yuan in its special drawing rights that November. This fanned longstanding fears of the yuan dislodging the dollar from its paramount position in global foreign exchange trading and reserves, but that hasn’t happened. As Exhibit 2 shows, the yuan’s introduction into official forex reserves hasn’t seen a spectacular spike. Almost a decade later, its share is 2.1%.

Exhibit 2: Share of Allocated Global Central Bank Reserves by Currency

Source: IMF, as of 8/11/2025. “Other” includes the Australian dollar, Canadian dollar, Swiss franc, and the IMF’s definition of “other currencies,” which include the Nordic currencies, the Singapore and New Zealand dollars and various Emerging Market currencies.

To us, there are two lessons for investors from this decade-old event. One is the standard reminder not to overrate narratives of the moment, which often prove wrong with just a little bit of time. The devaluation freakout has so clearly fallen into a memory hole that we found only one media reference to it in English.^[i]

Two, the recurrent fear over the yuan dethroning the dollar remains far-fetched. In almost 10 years, its share has barely grown at all—and it has actually inched lower since 2022. So happy Chinese Devaluation 10^th anniversary, to all who celebrate. Don’t party too hard.