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China Hits the Wall

The Yuan Devaluation and the End of the Economic Miracle

A man sits in front of an investment company's advertisement board bearing the image of Chinese Yuan at a financial district in Beijing, July 10, 2015. Kim Kyung-Hoon / Reuters

For the first time since 2008, economic alarm bells are ringing in China. Hard on the heels of a two-month stock market rout, the Chinese yuan lost nearly five percent of its value in just two days. The stock market might have rebounded, but the economy is still in trouble. Three and a half decades of easy profits from one-way bets on China's reintegration with the outside world have come to an end. China is now part and parcel of the global economy, and the normal laws of economic gravity apply in China, too. The first of those laws is that there's no such thing as a free lunch.

There is a financial crisis brewing in China, but the usual bugbears of the stock market, declining exports, and even the yuan crash are only appetizers, not the main course. The coming crisis has much more to do with demographic stagnation, capital

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