Devaluation of Chinese Money

Devaluation of Chinese Money

Devaluation of Chinese Money

Chinese Currency Devaluation

In theory, a devaluation of the Yuan would reinvigorate exports (1) Chinese, so that they recover their level of growth before the Asian crisis. Indeed, currency devaluations in several countries have made (in theory (2)) their prices more competitive. Chinese exporters often cite a price difference of 20%, so this figure is often advanced when it is necessary to define the extent of the devaluation of the RMB.

Looking at the overall exports, the advantage "currency" in the South East Asia, despite the devaluation, is not significant. In practice, Chinese exports compete directly with those in the South East Asia represent only 20% of total Chinese exports. The impact of devaluation would be very limited. A sectoral review of exports also shows that certain positions can increase only marginally: this is the case with the textile, whose imports in several European countries are subject to quotas, often already achieved (Dietmar, 1996, 96).

In many cases, this is not the only currency that has depreciated, it's the economic system collapsed, starting with the credit: in other words, companies experiencing major cash flow problems at the time where they have a need for working capital more important. This advantage is offset by currency of physical constraints; including logistic bottlenecks appear, for example in Vietnam (lack of containers, insufficient port capacity).

Even if a devaluation of the RMB would make products cheaper, this does not necessarily boost exports. Indeed, Asian countries, major recipients of Chinese exports, no longer consume (goods and services produced locally, such as those imported are housed in the same boat). By cons, exports to the United States likely would experience a further expansion, and should further increase the U.S. trade deficit, which could tarnish the Sino-US relations (and also have a negative impact on negotiations for China's accession to the WTO).

Increase in the service of foreign debt denominated in foreign currencies: this variable has been particularly acute in recent weeks with the closing of GITIC, which helped highlight an apparently widespread: the contraction of foreign currency borrowing, Authorization from plants (SAFE).

Devaluing its currency, China has artificially boosted exports from his country to the highest level. In fact, the entire Chinese economy keeps on undervalued currency. Recently, we observed a tendency of decline of the dollar against European currencies, as well as the Yuan is tightly pegged to the dollar, then this fall into the hands of the Chinese people - it gives them an added advantage in world trade. However, the devaluation is a double edged sword. If the Chinese government is concerned about attracting foreign investment into the country, the devaluation of national currency is not the best way to do this. The devaluation of 10% means that foreign investors have deprived 10% of income (Martin, 2009, 55-95.).

That is, devaluation, or the threat of it means the outflow of foreign capital from the country. Devaluation - is still some way to political ...