The stock market immediately got a real boost after the announcement that yuan will no longer be pegged to the dollar. If China decided to hold on to its new policy, it will not only have enduring effects on world economy but environment, too.
China, as the number one carbon dioxide emitter, has refused to negotiate an international comprehensive agreement for reduction of pollution so far. It remains unknown whether they will be willing to bargain in the future. Although the situation seems to be stuck, their recent decision in favor of a flexible currency may help to reduce pollution instead.
In fact, by allowing yuan to gain, the Chinese government is putting pressure upon enterprises. It is the reaction towards steadily rising production costs endangering China’s world power as a cheap manufacturer. Now that the yuan gains, chinese products become more expensive for the rest of the world. In order to stay competitve firms will have to lower production costs by increasing productivity.
If China decided to pursue its new policy on a sustained basis, increasing employment of modern technology would make production more environmentally friendly and reduce carbon dioxide emissions. The number one emitter would finally turn greener although it was not their intention at all. It is hard to predict whether China is going to allow for a flexible currency in the future, but at least we can hope so.