China’s trading partners should cheer the yuan’s recent depreciation, which may provide a boost to the Asia Pacific region’s flagging export sector.
Manila-based Asian Development Bank in a recent statement said China’s rival exporters would be threatened by Beijing’s move to let the yuan depreciate, which made the nation’s exports cheaper. However, countries that are part of China’s supply chain, including the Philippines, stand to benefit from this development.
“It’s important to keep in mind that many countries in the world, especially in Northeast and Southeast Asia, are integrated with China through regional and global value chains,” ADB chief economist Shang-Jin Wei said.
For years, China has rigidly controlled the value of its currency, keeping it strong against the US dollar. This ended earlier this month when the People’s Bank of China, the country’s central bank, allowed the yuan to lose ground against the greenback.
The move gives market forces a stronger influence on the yuan, also known as the renminbi. Letting the currency weaken also benefits Chinese exporters, which have suffered from the yuan staying strong since the start of the year.
ADB’s Wei said China’s decision was a “positive move” as it leveled the playing field between China and other major economies that operate with flexible currencies.
China’s neighbors should also welcome the news, he said, noting that many exporters in the region relied on trading links to the continent’s largest economy.
“They first export to China components and parts. Manufacturers in China then input their own components and value added and export them to the rest of the world,” the ADB economist said.
“Whatever is helpful to China’s exports is also helpful to other exporters linked to China,” he said.
More than a tenth or 11.4 percent of Philippine merchandise exports in June went to China, with the value reaching $600.92 million. This represents a decline of more than 30 percent year-on-year, according to data from the Philippine Statistics Authority.
China ranked third on the list of top destinations for Philippine goods. Total exports in June declined by 3.3 percent.