How does yuan's devaluation affect individuals and companies in China?
Updated 09:42, 07-Aug-2019
CGTN Global Business
The U.S. accused China of manipulating its currency after China let the yuan drop to its lowest point in more than a decade on Monday. And China's central bank governor Yi Gang responded on yuan's onshore exchange rate's sharp fall, saying that China would not engage in competitive devaluation.
The China Foreign Exchange Trade System shows that Chinese yuan steadied against the U.S. dollar on Tuesday after the central bank set mid-point at 6.9683.
How does recent fluctuation of yuan affect companies in China?
The recent devaluation of yuan against U.S. dollar will make travels and studies abroad in the United States more expensive for Chinese people. And imports from the U.S. could also see their prices rise in China.
For Chinese companies, it depends on what kind of businesses they do with the United States.
If they buy materials from the U.S. and sell products in China, following the rule for imports that rise in costs and loss of price advantage in the end market, the company may have to squeeze profits.
However, if the companies produce in China and sell abroad, the case will be on the opposite – an increase in product competitiveness abroad, and more profits.
Are the impacts strong?
Sheng Songcheng, the counselor from China's central bank, estimates that as long as basic stability is maintained, the fluctuation of the exchange rate has little impact on individuals and companies.
"The yuan depreciates a little today and may appreciate a little tomorrow. So the impact is basically insignificant. The most important thing is to maintain a reasonable stability of yuan exchange rate at the equilibrium level," Sheng said.
The central bank also said that the yuan has risen more than it has declined against the U.S. dollar and a basket of currencies in the past 20 years. In that sense, the Chinese people's yuan assets have been well protected and their purchasing power has increased.
While for companies, the central bank advised that they can use financial products to hedge against exchange rate risks.