Will the low Yuan have an effect for Chinese companies?

The last decades development in China, have made them one of the world superpowers. Their economy has been growing in an indescribable tempo, and this has increased the pressure on the Chinese currency.

China is one of the four BRIC countries, which have been predicted to get an even bigger impact on the world economy within the next 50 years. The three others is; Brazil, Russia and India. Most of these economies have been growing quite rapidly the last years, but especially during the economic crisis, China has been experiencing a significant growth compared to other countries around the world. They have been able to buy Spanish government bonds, and have also promised to buy Greek bonds once they are on sale again.

Some of these European countries are on the verge of bankruptcy, and it’s only with the help from other financial institutions, that they have been able to keep their head over water. This also changes the perception about the relative economic strength between former “big” and new “developing” countries - it’s a situation that we have to get use to.

As mentioned earlier this will automatically increase the pressure of the countries currency and this has been debated very lively the last couple of weeks. Especially USA and IMF believes that the Chinese currency is unnaturally low and has been held down, to make the US export to China more expensive.  

Internally in a country, the rise or lowering of a currency won’t have influence on the companies’ competitive strength. But once you include other countries, this has a big saying. When the Yen is still low, it enables the Chinese companies like Non Woven Bag Suppliers, T Shirt Suppliers, Baby Romper Suppliers, Sweater Suppliers, Wig Suppliers and LED Light Suppliers to get a competitive advantage, because it’s cheaper for importers to buy Chinese products compared to other countries products.

So in industries where companies compete on price, the currency is a very important and the companies will be very volatile towards a currency change. But it’s impossible to keep everyone happy, especially during a economic crisis, and USA and IMF are scared for their countries competitive ability in the future.