China has officially gone the "nuclear route", SocGen says, and the read through for the global economy is not good. The rather obvious takeaway from Beijing's FX stunner (and this would have already been clear to anyone who bothered to check the very three economic indicators that Premier Li Keqiang believes are the best gauge of economic activity in the country) is that things are far worse in China than most people were willing to admit, and when your export-driven economy is tethered to a surging currency that was set to strengthen even further in September on the heels of a possible rate hike, maintaining the peg comes at a cost. Of course until now, everyone seemed willing to pretend that because China was somehow able to withstand the pain even as the yuan appreciated on a REER basis by some 15% in a year, that things must not be all that bad under the hood. That illusion was shattered on Tuesday. Here's Bloomberg summarizing SocGen's take (spolier alert: it's horrible news for global demand and commodity prices, could delay Fed liftoff, and it raises the risk that the global deflationary supply glut will get worse) along with some favored trades for playing the Beijing currency nuke. China triggering "nuclear option" of devaluation may be sign eco challanges are "much more severe than perceived thus far," SocGen strategists led by Ramon Verastegui write in note. China eco challenges pose risk to global growth/inflation, Fed Sept. liftoff scenario, could further lower ylds at long end of curve. Selloff in commod prices, related industries may continue as mkt discounts China slowdown, risk of supply glut from unwinding of CCFDs Buy USD contingent flattener floors; 6M 5y-30y USD curve floor, strike ATMF, contingent on USD 2y Buy TLT $126/128 call spread for 71c, buy Sept. IYR $77 call, sell SPY $214 call for 0.38% Buy SocGen Airline basket (ALK JBLU DAL LUV UAL AAL SAVE HA ALGT) Buy EWC Oct 22/24 put spread for 40c and Australia (Buy EWA Oct 17/19 put spread for 35c Trade accordingly, or not.