- Joined
- Jan 3, 2009
- Messages
- 2,605
- Points
- 0
China Yuan set to rise - The losers and winners.
* Chinese exporters, including foreign companies that own factories in China, will become less competitive. These companies pay wages in yuan, but set export prices in dollars and euros. Some, such as Toyota and Honda, are already facing strikes by Chinese workers to raise their wages. Many exporters operate on very thin profit margins that could be wiped out by the yuan's rise.
* Foreign consumers, especially in the US, will have to pay more for goods made in China.
* A rising yuan could be bad news for the environment, as it will make it cheaper for China to import raw materials and energy resources. The country's heavy industries are already widely criticized for poor standards of air, water and soil pollution. China is also the world's biggest growing producer of carbon emissions.
* The People's Bank of China will be a big loser, even though its bankers may be happy about the policy change. Because of the central bank's currency policy, it has borrowed trillions in yuan and invested it in US treasuries and other dollar assets. The value of those treasuries in yuan is now set to fall, causing the central bank hundreds of billions of dollars in paper losses.
The Winners.
Speculators who anticipated the central bank's announcement borrowed in dollars and bought Chinese assets, including property and Chinese shares. Others speculated on currency forward contracts, which have jumped in value on Monday.
Foreign manufacturers that compete with Chinese imports will be smiling - think of toymakers and clothes makers in the US. Also, other big exporting countries such as Japan, Korea, Taiwan and Germany will gain a competitive advantage over their Chinese rivals.
Foreign companies (particularly in the US) that export to China will become more competitive. These include carmakers, technology companies and engineering firms. The price of their goods in yuan will be cheaper, and the money they earn in China will be worth more in their home currency.
* Chinese exporters, including foreign companies that own factories in China, will become less competitive. These companies pay wages in yuan, but set export prices in dollars and euros. Some, such as Toyota and Honda, are already facing strikes by Chinese workers to raise their wages. Many exporters operate on very thin profit margins that could be wiped out by the yuan's rise.
* Foreign consumers, especially in the US, will have to pay more for goods made in China.
* A rising yuan could be bad news for the environment, as it will make it cheaper for China to import raw materials and energy resources. The country's heavy industries are already widely criticized for poor standards of air, water and soil pollution. China is also the world's biggest growing producer of carbon emissions.
* The People's Bank of China will be a big loser, even though its bankers may be happy about the policy change. Because of the central bank's currency policy, it has borrowed trillions in yuan and invested it in US treasuries and other dollar assets. The value of those treasuries in yuan is now set to fall, causing the central bank hundreds of billions of dollars in paper losses.
The Winners.
Speculators who anticipated the central bank's announcement borrowed in dollars and bought Chinese assets, including property and Chinese shares. Others speculated on currency forward contracts, which have jumped in value on Monday.
Foreign manufacturers that compete with Chinese imports will be smiling - think of toymakers and clothes makers in the US. Also, other big exporting countries such as Japan, Korea, Taiwan and Germany will gain a competitive advantage over their Chinese rivals.
Foreign companies (particularly in the US) that export to China will become more competitive. These include carmakers, technology companies and engineering firms. The price of their goods in yuan will be cheaper, and the money they earn in China will be worth more in their home currency.
