The Chinese currency, the yuan, has been devaluated by the Chinese government by 1.9%. The purpose is to boost exports. This move came as a big surprise to the market. Mike Su from Sufresh, a Chinese importer and exporter, was very happy with the governments decision. "The government has made a very smart move. Fruit and vegetable export is going to see large growth, which is good for the industry."The stock exhange for the Chinese currency, the yuan or renminbi, is connected to the dollar. This has seen a large spike in connection to other currencies such as the Euro and the Japanese yen. As a consequence, the yuan has become 10% more expensive in comparison to the yen and the Euro. This is why the Chinese authorities have decided to lower the yuan's forex rate.
Effect on import
Although exports will see a significant boost, this doesn't mean that it will not have a negative effect on fruit and vegetable imports. "Naturally, imports are going to become more expensive due to this action. I am currently paying almost $1 per box extra for my imports out of South Africa," Mike Su continues. Still, he expects that it should not affect the demand for imports. "Import goods are always more expensive and are primarily purchased by China's wealthy. They are not going to bat an eyelid at a few cents."
More consequences expected
It is difficult to say whether or not the Chinese government has any more surprise decisions planned. "I suspect that the government is first going to see how this all plays out, but I would not be surprised if it is set at an even lower rate in the future." says Mike Su from Sufresh.