China’s yuan depreciation complicates trade outlook, leaves manufacturers ‘nervous and passive’
- In the onshore market, the yuan closed on Friday at 6.7863 per US dollar, after hitting a 19-month low of 6.8110 in midday trading
- Weaker yuan has led to capital outflows against a backdrop of a slowing economy, coronavirus disruptions and an aggressive US Federal Reserve interest rate policy
The fast depreciation of the yuan towards the key level of 7 per US dollar has complicated China’s trade outlook, with producers having to pay more to buy materials overseas while receiving fewer orders from markets in Europe and the United States, according to business insiders.
The yuan is expected to weaken further as monetary authorities have refrained from deploying forceful measures to intervene in the foreign exchange market, unlike in Hong Kong where HK$8.533 billion (US$1.09 billion) has been spent in three interventions in the last two days.
The yuan’s depreciation is always good for exports, but not for raw material imports
“Every industry insider is very nervous and passive,” said Liu Kaiming, head of the Institute of Contemporary Observation, which partners with global brands to supervise supply chains and working conditions in Chinese factories.
“The yuan’s depreciation is always good for exports, but not for raw material imports.”
In the onshore market, the yuan closed on Friday at 6.7863 per US dollar, after hitting a 19-month low of 6.8110 in midday trading.
The daily midpoint reference for the yuan has depreciated by around 6.4 per cent against the US dollar in the past month, reminiscent of the currency depreciation and capital exodus seen between 2015-17.