China's currency devaluation could spark 'tidal wave of deflation'

Western central banks advised to resist raising interest rates and told to prepare to ward off deflationary slump in face of cheaper Chinese exports

"Make no mistake, this is the start of something big, something ugly." City economist Albert Edwards rarely minces his words, but his reaction to China's devaluation, which sent shockwaves through global markets, underlined how powerfully Beijing's move may be felt thousands of miles away.

Edwards, of the bank Socii(C)ti(C) Gi(C)ni(C)rale, argues that as well as creating a challenge for China's Asian rivals, by making its exports more competitive, a cheaper yuan will send "a tidal wave of deflation" breaking over the world economy.

Related: Why has China devalued its currency now and what impact will it have?