All currency wars are self-defeating for their combatants. When a country slashes the value of its currency to boost exports, it inevitably triggers competitive devaluations by its trading partners, thereby robbing the first mover of its initial advantage. Thus it is unlikely that China, which in effect devalued the renminbi by 2 per cent yesterday, was intending to whip up currency skirmishes among its trade partners into a full-scale war.

But intentions are one thing, consequences another. China’s position as the world’s largest trading power ensures that its action will distribute deflationary pressures throughout its global supply chain, while intensifying pressure on competitors to seek their own currency depreciations. Such pressures will only grow if yesterday’s action signals a sustained trend of weakening, as many analysts expect.

In its most crucial sense, the impetus for China’s devaluation, which represented the renminbi’s biggest drop since 1993, was self-defence. It is not just that exports have been dismal so far this year and tumbled again in July by 8.3 per cent. It is also that China is suffering from a chain reaction of structural economic ills that threatens to run out of control. As ever, China’s true predicament is obscured by official statistics. The official gross domestic product growth rate was 7 per cent in the second quarter, but several independent analysts estimate that in reality it may be closer to 4 per cent.