The August 2015 exchange-rate reform and market turbulence

On August 11, 2015, the People's Bank of China overhauled how it set the renminbi's daily central parity rate against the US dollar, shifting from an administratively set midpoint to one anchored to the previous day's closing market rate, a step the central bank itself describes as making the currency's central parity more market-based. The adjustment produced a roughly 2% one-day depreciation, the currency's largest single-day move in two decades, arriving alongside a sharp slide in Chinese equity markets and weakening trade data that together signaled the economy's investment-and-export-led growth model was losing momentum after years of double-digit expansion. The PBOC held an unusual press conference to explain that the move was a technical reform toward market pricing rather than a deliberate devaluation to boost exports, but the timing fed global anxiety about a harder Chinese slowdown, triggering capital outflows and forcing the PBOC to draw down foreign-exchange reserves to manage the pace of depreciation over the following months. The episode is now treated by the PBOC as a landmark step in the renminbi's gradual move toward two-way, market-driven fluctuation.