What is China doing devaluing the yuan?

What is China doing devaluing the yuan?

China as a nation is certainly inscrutable, but they are no fool. So why on earth would they want to devalue the yuan. The traditional answer was that by devaluing your currency you boosted exports (your own exports were now cheaper for others to buy) and you deterred imports (any imports you made were now more expensive for your residents to buy).

While this might once have made sense for some economies it hardly makes sense now, especially for China. Their exports are already a fair chunk of the world industrial production, there is no plausible competitor for them, the amount of the devaluation is trivial, and would in any event just be swallowed up elsewhere in the supply chain as extra profit for someone else. The Chinese people really don’t import much, although there is a luxury goods market in China, by and large the problem with the Chinese economy is that there is no real consumer economy. The Chinese people save, they don’t spend.

So I am assuming that there is a reason why the Chinese are devaluing, but if it is not one of the traditional reasons then what is it?

Overseas loans - Massive amounts of capital flow out of China, but my assumption is that any such loans would be denominated in the debtor country’s currency, so the American debt to China would remain in dollars, so yuan devaluation makes no difference.

Positioning themselves for a future free floating currency - possible but is it really worth the trouble.

In the absence of anything better, my guess is that there is an air of panic in China. No economy is stable in and of itself, but there can be few economies more dependent on others than China’s. It is a country that produces vast amounts of goods for export, then does not spend the resulting income, having to also export capital, hoovering up investments and encouraging debt across the world. The Chinese economy is so out of balance, with a ridiculously small internal consumer market, that it depends on other countries to buy its goods, and also to receive its loans and investments. When the economic pace starts to falter in the rest of the world, China has nothing to fall back on.

Has China become the cuckoo that outgrew its little surrogate parents.

[http://krugman.blogs.nytimes.com/2015/08/13/china-2015-is-not-china-2010/?_r=0 Paul Krugman piece that I saw after I wrote this]