China’s renmimbi and the global ring of fire

In a 29 August article in the Financial Times, Paul Hodges and Daniel de Blocq van Scheltinga refer to an earlier interview that William White gave to the Daily Telegraph. The general concern he raised was that a growing level of global debt could trigger or exacerbate another global recession. More particularly, White stated his concern about the growing level of dollar denominated debt, issued by non residents of the United¬† States. This exposed the issuers to dangerous currency mismatch problems should the US dollar continue to strengthen. The recent depreciation of the renmimbi was worrisome in that regard, particularly if it sparked renewed capital flight from China, as was the possibility of another “Risk Off” phase in international capital flows.