In a shock, for the second day in a row, the Chinese Communist Party has devalued China's currency. This comes on a promise from the People's Bank of China that the first devaluation that roiled world markets, just yesterday, was a "one-off depreciation."
Down a whopping five percent in off-shore trading in only two days, the yuan is valued at 6.43 per US dollar (at the time of writing), making it cheaper for the world's consumers to buy from China, but more expensive for China to purchase commodities and foreign goods from around the globe.
For decades, the Chinese Communist Party has tightly managed an economy to resemble a free market without letting go of the reins. But China's government is finding its management stumbling at a time that wages have grown across the country while factories are unable to keep the pace of cost increases.
According to a Hong Kong-based watchdog, China Labor Bulletin, unrest is growing in China. The group released a statement that 1,218 labor strikes have taken place this year, compared with 1,379 events for the entire last year.
In the city of Dongguan, a manufacturer that supplied toys to Mattel shut down on August 3 after admitting it was insolvent. More than 700 workers took to the streets and demanded three months of back-pay. The local government came to the rescue with the funds for the workers and the police doused the strike and forced the workers to retreat.
For more than a decade, the Chinese government has flirted with market forces to value the yuan, but as wages have grown, factories who make up 31 percent of GDP according the World Bank, have demanded aid from the government to make their exports more competitive.
Despite assurances from economists that exports in China would drop only one percent in July, China saw a plunge of 8.3 percent from a year ago. Exports to Japan fell 13 percent, to Europe: 12.3 percent, and exports to the US fell 1.3 percent.
Under wage pressure, Foxconn, a Taiwanese electronics company who makes the iPhone, among other products, and employs 1.3 million employees almost entirely in China, signed an agreement on Saturday to invest $5 billion over the next five years in India.
Chinese export businesses have begged the country to devalue the currency and save their businesses. With two major devaluations in a row, economists will be watching if China can put the economic miracle genie back into the bottle.
In the state-owned English news website, Xinhua, the Communist Party said accusations that China is manipulating its currency to gain a trade advantage "do not hold water" and that worries are "exaggerated."
The government tried to assure readers that a slump in exports were "largely a reflection of sluggish external demand" and said the rise is due to the "fresh recovery momentum" of the US economy. "It is natural that the U.S. dollar has appreciated," the Chinese government wrote.