Analysis: In face of 'Impossible Trinity,' options for China and its battered currency are all painful
To battle the rapid decline in its foreign exchange reserves, China could tighten capital controls, but that hurts the transformation of the yuan into a major reserve currency. The country could raise interest rates, but that would curb economic growth during a slowdown. It could let the exchange rate fall significantly, but that would make debt more burdensome for Chinese companies. The way forward? Patience and the willingness to let weak businesses die so to address the roots of the country's economic woes with the goal of boosting domestic demand.