Why China has learned to relax about its currency

IN A WORLDPBOCPBOC in which transparency has become a fetish, it is refreshing to try to get a read on the People’s Bank of China (). Its various nods and winks give market analysts something to interpret—or over-interpret. On May 31st it announced that it would increase the proportion of foreign-currency deposits that commercial banks must keep on reserve at the central bank, from 5% to 7%. After some chin-scratching, watchers came to a conclusion: China was sending a signal that the yuan had been rising a bit too quickly.China used to intervene directly—by buying and selling dollars—to get the exchange rate it wanted. As recently as 2016 it ran down its foreign-exchange reserves from $4trn to $3trn to support the yuan. But for the past four years or so its reserves have been stable; there has been no large-scale intervention to either put a floor under the yuan or to check its rise. The surprise is not that China has thrown a little sand in the gears of its currency market. It is that it has become so tolerant of some fairly big swings in the yuan’s value.