The situation is complicated still more when an important participant is seen as having superior information owing to its investment in research or its understanding of its own behavior. In such circumstances, certain types of central bank talk might actually impinge on welfare-enhancing market pricing by being misunderstood and receiving too much weight relative to private judgments.
In recent months, capital outflows in China have moderated as pressures on the exchange rate have eased. Should exchange rate pressures reemerge, we cannot rule out a recurrence of financial stress, which would affect not only China but also other emerging markets that are linked to China via supply chains or commodity exports and, ultimately, conditions here.