Industry assesses impact of yuan devalation

The devaluation of the Chinese
yuan could see even greater
volumes of imports moving into
South Africa
as the products
become
cheaper.
But it’s still
a bit early
to tell what
effect the
devaluation
will have on
the shipping
industry,
according to
Glenn Delve,
marketing
director in SA of
Mediterranean Shipping
Company (MSC).
He believes that it “will have
a bearing on shipping in due
course”.
Another line executive on
the Far East trade suggested
that everybody seemed to have
a different view of just what
this devaluation held for the
maritime sector.
“It’s definitely a pot of mixed
feelings,” he said.
However, London’s specialist
research and
advisory
organisation
for the
maritime
sector, Drewry
Shipping
Consultants,
has come up
with its own
theory. It
calculated that
growth in port
throughput
was likely to
be approximately 4.9%, a big
drop on its previous estimate
of 5.8%.
And, with Greater China,
including Hong Kong,
representing around 30% of
total global container moves, it
figures this would represent a
shortfall of around 1.9 million
TEUs.
China is the world’s number
two economy, with expectations
of overtaking top economy US
fairly soon. It is also a key driver
of global growth.
But it has had to shift its
aspirations down a gear to
growth of around 7% – the
worst growth in almost a
quarter of a century. But the
International Monetary Fund
(IMF) is even talking about
China undershooting that mark
this year at 6.8% and then even
lower at 6.3% in 2016.
Luke Doig, senior manager
of investments & economic
services at the Credit Guarantee
Insurance Corporation
(CGIC), defined what he saw
happening.
“Locally,” he told FTW, “it
implies even higher competition
from Chinese imports, and they
have far outweighed those of
any other country in the first
half of 2015.”
Looking at the trade
statistics for SA imports in the
first six months, China came
out miles ahead
of all the other
main trading
regions for SA.
His figures
showed that
Chinese exports
into SA in
the first half
totalled R91.3
billion; 55%
more than second-placed
Germany’s R58.9bn; 141.5%
more than third-placed USA’s
R37.8bn; 365% up on Japan’s
R20bn; and 427.7% on the
UK’s R17.3bn.
“China depreciated its
currency on three successive
days last week,” said Doig.
“After what was originally
described as ‘a one-off’ move on
Tuesday, where the fix point of
the yuan was lowered by 1.9%,
Chinese authorities caught the
markets off-guard by dropping
the peg by a further 1.6% on
Wednesday and on Thursday
announced another 1.1% cut.
However, the yuan actually
strengthened slightly after
market interventions by the
Chinese central bank, which
sold US dollars.”
The reason(s) he saw were
primarily due to that weakness
in the Chinese economy as
it battled to achieve its 7%
growth target for the year.
“This,” Doig added, “will
obviously boost Chinese export
competitiveness, especially
amongst other Asian exporting
countries (South Korea, Japan
etc). It may also cause the
Fed (US Federal Reserve) to
consider not raising rates in
September due to US dollar
strength affecting their own
export efforts.”
INSERT & CAPTION
Locally it implies
even higher
competition from
Chinese imports.
– Luke Doig