US's President Donald Trump and China's President XI Jinping in their last meeting - Photo by The State Council The People's Republic of China

JAKARTA (TheInsiderStories)–the significant depreciation of the Chinese yuan against the US dollar from around CNY 6.28 in mid-February to CNY 6.80 on 20 July does provide a significant offset to the loss in export competitiveness for Chinese exporters due to higher US tariffs, IHS Markit Report on Friday (20/06).

Asia Pacific Chief Economist at IHS Markit Rajiv Biswas said the Chinese yuan broke through 6.80 against the USD in the morning trading session in Asian currency markets on 20 July, continuing the slide that commenced in mid-February.

Despite the escalating US-China trade war, the significant depreciation of the Chinese yuan against the US dollar from around CNY 6.28 in mid-February to CNY 6.80 on 20 July does provide a significant offset to the loss in export competitiveness for Chinese exporters due to higher US tariffs.

The CNY’s slide against the US dollar will substantially cushion the impact on Chinese exporters from the planned next round of US tariffs at a 10% rate on USD 200 billion of Chinese exports to the US.

However, the US Section 301 tariffs implemented at a rate of 25% on 6 July on US$34 billion of Chinese products will still hit Chinese exporters hard, with the 25% tariff measures expected to extend to an additional US$16 billion of Chinese products following the US government’s tariff review process.

Some other Asian emerging markets currencies such as the IDR and PHP have also depreciated significantly against the US dollar this year as the US Fed has continued to gradually hike US policy rates.

However, the CNY’s slide will also become an increasing concern to many Asian low-cost manufacturing export hubs such as Vietnam, as the CNY’s rapid depreciation affects their relative export competitiveness in key markets such as the EU and Japan.

Email: fauzulmuna@theinsiderstories.com

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