Good for Export?! RMB Depreciates Continuously These Days!

The yuan weakened to as much as 6.5160 per dollar in onshore trading on June 21st, before trading little changed as of 3:00 p.m. local time. That means, the devaluation almost fall to its lowest level on this year's records.

So, what will be the influences especially on foreign business? Will it be negative or positive? Let's see!

Depreciate for a reason?

China may let the yuan depreciate gradually as a tactical move in its trade war with the US, evaluating the economic impact of a weaker yuan as a countermeasure to US tariffs, although it 

doesn’t mean the currency’s devaluation.

Senior Chinese officials are studying a two-pronged analysis of the yuan that was prepared by the government. 

One part looks at the effect of using the currency as a tool in trade negotiations with the U.S., while a second part examines what would happen if China devalues the yuan to offset the impact of any trade deal that curbs exports.

Positive:

A weaker yuan could help shore up China’s export industries in the event of widespread tariffs in the U.S..

Negative:

● Make it more difficult for Chinese companies to service their mountain of offshore debt.

● Undermine recent efforts by the government to move toward a more market-oriented exchange rate system.

Risks:

Expose China to the risk of heightened financial-market volatility. When China unexpectedly devalued the yuan by about 2 percent in August 2015, the move fueled capital outflows and sent shock-waves through global markets.