The renminbi’s sudden devaluation against the US dollar by about 1.9 percent will help Hong Kong enterprises that have manufacturing operations in mainland China, according to local businessmen.
“The renminbi devaluation is great news, our products will become more competitive,” a plastic products maker told Wen Wei Po.
As the company exports its products and collects revenue in US dollars, it will translate into more renminbi income now, he said, adding that the increased income will help the firm offset wage and rental costs.
The businessman said his company had earlier been forced to move some of its operations to Myanmar due to cost pressures in China.
Another business executive, whose firm makes some daily use items in Shenzhen and exports to Hong Kong, Macau and other overseas markets, also cheered China’s weaker currency.
The company will benefit as its manufacturing expenses are in renminbi while overseas customers are billed in the Hong Kong dollar, which is pegged to the greenback, he was quoted as saying.
A wood flooring exporter said his firm’s sales to America, the company’s biggest market, declined 10 percent in the first half of this year, and that some industry players had to suspend production nearly 70 percent of the time.
But now a weaker renminbi may help revive business by raising the cost competitiveness of made-in-China products, he said.
While exporters in general favor further softening of the renminbi, analysts feel drastic and sustained decline of the Chinese currency won’t be possible.
With Beijing seeking to internationalize its currency, it will be hard to persuade foreign investors and overseas central banks to hold more renminbi if the unit keeps depreciating, the analysts pointed out.
Also, the last thing China wants to see is a massive, sudden capital outflow triggered by depreciation fear.
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