Yet again, China’s currency, the renminbi, is under pressure. After three years when it was fighting to keep the currency’s value from depreciating too quickly relative to the dollar, the tide has shifted once more for the People’s Bank of China. Now, as in the decade since it ostensibly delinked the renminbi from the dollar in 2005, the central bank is striving to limit the currency’s appreciation against the dollar.

Policies governing the capital account, which influence fluctuations in the currency’s value, have also come full circle. In the early years of this decade, the government gradually liberalised capital outflows. The hope was that more outflows would reduce appreciation pressures by offsetting the copious sums of money flowing in through trade surpluses and capital inflows.

Then, for the past three years, these policies were reversed as the currency faced depreciation pressures. Concerns about risks to growth and the financial system stoked a spiral of currency depreciation and capital outflows. The central bank tightened up on capital outflows. This initially led to more panic-driven outflows, but eventually the PBoC won the battle.