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发帖数: 29846 | 1 The Next Shoe’s Falling Next Door——–Taiwan, Malaysia, South Korea
Exports To China Imperiled
by Wall Street Journal • August 13, 2015
By Anjani Trivedi and Chao Deng at The Wall Street Journal
The currencies of Asian emerging markets that trade heavily with China fell
sharply after Beijing devalued its currency, as investors bet a weaker yuan
will add to pressures on their deteriorating economies.
Investors have pushed the currencies of South Korea and Malaysia down over 2
% in the past two days, making them among the biggest losers globally since
China devalued the yuan, which has fallen as much as 3.7% over the same
period. In recent days, Vietnam and Taiwan have engineered drops in their
currencies.
These nations’ exports to China are worth over 10% of their gross domestic
product, making them dependent on Asia’s largesteconomy to fuel economic
growth. While other countries that trade with China, like South Africa and
Brazil, have seen their currencies decline in recent days, some of the
biggest losses have been in Asia.
For years, Asian exports grew at double-digit rates but are now barely eking
out growth. Chinese imports have already been weakening due to the slowing
economy—a weaker yuan exacerbates the pain for exporters as it makes goods
more costly for Chinese consumers. As the currency declines, Chinese
consumers could turn more toward locally made brands. Chinese makers of
cellphones and other consumer products also get an edge in global markets
over North Asian rivals.
ENLARGE
Analysts say the yuan’s decline could force many of the exposedeconomies to
push their currencies down further to make exports more competitive, adding
to negative sentiment on their currencies.
“The fear now has increased about currency wars and the potential negative
economic pressure from decreased exports”, said Matt Lloyd, chief
investment strategist at Advisors Asset Management based in Colorado.
The yuan’s devaluation has added to growth headwinds in emerging markets
due to China’s slowing economy, a deepening slump in commodities, waning
global growth and expectations the U.S. will raise interest rates this year.
A lack of economic reform in many developing nations also has hurt
investors’ sentiment.
Countries have tried interest-rate cuts and fiscal spending to aid their
economies, but growth in many places has continued to sag. That has made
weaker currencies a last resort, including for China.
Taiwan this week responded to China’s devaluation by reducing the rate it
pays commercial banks for overnight deposits, a move which pushed its
currency down 2% in two days, its biggest loss since the global financial
crisis. Vietnam widened the band in which it allows the dong currency to
trade, leading to a 1.2% loss over the last three days.
Taiwan’s exports to China are worth 30% of its economic output due to its
reliance on selling intermediary goods like semiconductors to finished items
such as packaged foods and machinery. Exports tumbled 12% on year in July,
largely due to a drop in shipments of petrochemical products to China.
South Korea saw the won pushed to its weakest in four years, down 2% over
the last two days and 8% lower since the start of 2015. More than a quarter
of South Korea’s total exports go to China. Abroad, the country faces
competition from China on a range of low end to high end tablets, cellphones
and other electronics.
For commodity exporters like Malaysia and Vietnam, the concern is that a
weaker yuan increases import costs for Chinese consumers of products like
rubber, coal and iron ore, further undermining demand.
Weaker currencies are supposed to make exports more competitive in global
trade, but if they fall too far, they start presenting challenges
domestically and are rarely a source of good news.
Malaysia’s ringgit fell 2.7% in the two days after China’s move, and is
down 15% this year. A weaker currency could help the country’s commodities
and electronics exports to China, but the nation’s central bank is worried
the fast pace of declines doesn’t represent the underlying economy and
could spur capital flight.
In South Africa, a decline in the rand has led to inflation problems and the
central bank last month was forced to raise rates, compounding its economic
slowdown. Officials in Indonesia, another big commodity-exporter, have
voiced concerns in recent days about weakness in the rupiah, which is at its
lowest level since the Asian financial crisis of the late 1990s.
“All markets have been under pressure because of worries about competitive
devaluation,” said Jean-Charles Sambor, Asia Pacific director at the
International Institute of Finance. “All emerging market countries are more
dependent on China’s economy than they were 20 years ago”. |
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