Concerns about the pace of the slowdown in China have increased recently following a run of weaker than expected economic data and China’s decision to devalue the renminbi. The devaluation of the renminbi exacerbated recent market volatility, fuelling global uncertainty about the motivation for the policymaker’s decision. This article explores the possible reasons for the devaluation and the recent macroeconomic developments in China. The approach that China adopts in managing the transition from an investment to a consumption driven economy will be crucial for the outlook for global growth and financial markets. Australia’s economy and investment markets are particularly exposed to developments in the Chinese economy, given the reliance upon China’s demand for commodities.