The impact of Brazil's devaluation could play a key role in deciding whether to devalue the yuan, according to CLSA Global Emerging Markets.
Chief economist Jim Walker said that a rapid recovery in Brazilian markets in the aftermath of the devaluation of the real would indicate to Beijing that currency devaluation could be an effective means to reduce real interest rates.
CLSA is predicting a 10 per cent yuan devaluation in the second half of the year.
Such a devaluation would restore the mainland's competitiveness to where it was prior to the onset of the Asian crisis, Mr Walker said.
A decision to devalue would be based more on domestic economic concerns, such as excessive real interest rates, than issues of export competitiveness, he said.
On Sunday, the China Daily Business Weekly reported that some analysts believed a yuan devaluation would 'not definitely be a bad thing' given the financial market reaction to the devaluation of Brazil's real.
