China Revaluates Yuan – Let the Scenario Planning Begin
By George Anderson
China’s decision last week to peg the value of the yuan to a number of foreign currencies and not simply the U.S. dollar has generated a lot of speculation on what it will mean for various sectors of the U.S. and world economy.
With approximately 14 percent of total U.S. imports coming from China, any action that could increase the prices of goods coming from that country is a concern for businesses that buy and resell those goods to American customers.
Most economists and monetary experts, however, seem to think the revaluation rate will have little or no impact, at least for the short term, on the prices paid by consumers in this part of the world.
Huo Jianguo, described as a foreign trade official with China’s Ministry of Commerce (MoC), does not expect to see any negative impact on the country’s ability to export goods unless the yuan’s revaluation rate goes above five percent against the U.S. dollar. The current revaluation rate put it as two percent against the dollar.
If anything, the country’s decision to revaluate the yuan may bring it more American dollars as it addresses, albeit in a small way, the call by some in political and business circles to restrict the access of Chinese goods to American markets.
Mr. Huo said his country and the U.S. will soon resume trade talks over the export of textiles and paper to the American market.
Moderator’s Comment: Putting yourself in the position of an American retailer doing scenario planning, what do you see as the potential longer-term consequences
of the decision to revaluate the yuan and the actions your business might have to take in response?
– George Anderson – Moderator
- China’s yuan revaluation of 2-5 pct seen as bearable by exporters – report
– AFX News Limited/Forbes.com