In the view of economists at Natixis, China’s economic strategy must now change. China’s growth strategy will revert to a mercantilist strategy – which requires a weak currency.

Why should China move to a weak currency (renminbi) strategy? 

“The structural weakness of domestic demand in China due to population ageing is forcing China to revert to an export-based mercantilist strategy.”

“This strategy requires a weak currency (renminbi), while the previous domestic demand-stimulus strategy required a strong renminbi. We can therefore expect further depreciation of the renminbi.”