China has devalued its national currency to its lowest rate against the US dollar in almost three years.
The People’s Bank of China said the move was a “one-off depreciation” to make the exchange rate more market-oriented.
Many analysts also believe it was an attempt to support China’s flagging exporters.
However, it has raised fresh concerns for Australia’s resources sector and the economy as a whole, with some economists and miners warning it has the potential to further damage an already shaky resources industry.
Bill Beament, the managing director of gold producer Northern Star, said the economic slowdown in the world’s second-largest economy is in fact being felt across all miners.
“The negative sentiment in China is what’s flowing through to the base metals and the iron ores in bulk,” he observed.
It follows a string of weak economic data from China – last weekend China revealed its exports fell by 8.3 per cent in July, far worse than expected.
“Chinese exports have become very expensive. China’s manufacturing cost is only marginally lower than in the US. So this actually makes China’s exports uncompetitive,” said Francis Lun, the CEO of Hong Kong brokerage firm Geo Securities.
Economists said China’s policymakers are running out of options to stimulate the economy – except maybe for one.
“By our estimates, so like a PPP (purchasing power parity) estimate for instance, the renminbi was 10 per cent over-valued,” Michael Metcalfe, the head of macro strategy at State Street, told Bloomberg.
Mr Metcalfe said by dropping the value of China’s currency, the renminbi, exporters should receive some immediate relief and the economy a boost.
Australian economists though are not so sure though.
“It just underscores the fact that the Chinese economy is slowing,” argued independent economist Saul Eslake.
He sees it as a zero-sum game – as Chinese exporters benefit from the lower currency, Australian companies lose out.
He said lower international commodity prices simply rub salt into the wound.
“Overall, resources exporters are probably worse off today with commodity prices being where they are and the currency at 70 cents than they were three or four years ago when commodity prices were a lot higher as well as the Australian dollar being higher,” Mr Eslake added.
However, Mr Metcalfe said the initial sell-off in commodities may not be maintained if the currency move succeeds in boosting Chinese industry.
“It’s interesting that the reaction we’ve seen so far has been to hit commodity-linked assets, hit commodity prices,” he observed.
“But this is easing by China which, in general, should be supportive of those assets in the medium term.”
Economists and mining managers are now waiting to see if China will once again push down its currency or if this really was just a one-off move.
source：http://www.abc.net.au/news/2015-08-12/analysts-debate-chinese-yuan-devaluation/6690658