With the yuan having passed the benchmark level of 7 per US dollar earlier this month, China’s foreign trade is expected to improve in the second half of the year, which would help cushion tariff pressure caused by the ongoing China-US trade war, exporters and analysts told the Global Times.
“The yuan’s depreciation is good for our business and we’re pocketing more profit because of the exchange rate change,” a representative of Shifeng Decorative Lighting Co based in Yiwu in East China’s Zhejiang Province, who only gave his surname as Ying, told the Global Times on Thursday.
He said that in 2018, the yuan’s relatively high exchange rate against the US dollar caused his US clients to lose about 10 to 15 percent of their sales. It also weighed on his business, which saw a 15 to 20 percent profit drop per order.
But the yuan’s recent depreciation is compensating for those losses.
Ying has suggested lately that his clients increase their purchases as the ongoing trade war holds much uncertainty.
Liu Xiangying, vice general manager of Korra Bath Ware Co, a sanitary product producer focused on exports that’s based in Foshan, South China’s Guangdong Province, told the Global Times on Wednesday that the currency’s depreciation is favorable for the company compared with the situation last year, when the yuan was kept strong amid the trade war.
“But the real benefits should be reflected later in our financial results,” said Liu.
Vincent Zhang, chairman of Zhongyuan Creative, an electric wire manufacturer located in Foshan, told the Global Times on Wednesday that the depreciation can cushion some of the pressure of US tariffs, which the exporter has been facing since last year.
“But we still lost some money because of the exchange rate in the first half of the year… hundreds of thousands of yuan,” said Zhang, adding the company is upgrading its production line with more automatic and intelligent manufacturing.
In most cases, orders are placed half a year earlier, but one thing is certain: Chinese exporters can earn more renminbi if exchanged from the greenback thanks to the yuan’s depreciation, said Yang Changyong, a senior research fellow at the Chinese Academy of Macroeconomic Research.
“China’s foreign trade companies should pay attention to the two-way fluctuation of the currency and focus on enhancing their product competitiveness instead of the exchange rate,” Yang told the Global Times on Thursday.
Yang said the foreign trade situation in the second half is likely to show a steady trend with improved quality.
The State Council, China’s cabinet, said in July that more measures will be adopted to keep foreign trade stable. Further expanding opening-up and focusing on enhancing the endogenous power of enterprises through market-oriented reforms and by economic means are the key measures.
“In terms of the exchange rate, there won’t be drastic fluctuations. It will stay at a reasonable and steady range in the medium and long term,” said Yang.
China’s central bank set the official midpoint reference for the yuan at 7.0268 per US dollar on Thursday, stronger than Wednesday’s fixing of 7.0312.
The exchange rate of the yuan against the US dollar passed 7 for the first time since 2008 on August 5 in both the onshore and offshore markets.
An IMF reported released on Saturday said that the yuan’s exchange rate was broadly in line with its economic fundamentals and there was no sign that the country’s central bank had intervened.
Newspaper headline: Yuan depreciation to rev up export shipments