Yuan Move Likely To Boost Thai Exports

[webfact]

Yuan move likely to boost Thai exports

By Achara Pongvutitham,

Petchanet Pratruangkrai

But China must back up its words with action, exporters maintain

China's promise to end the yuan's peg to the US dollar will boost Thai exports, as it will transform that country even more into a consumer-led economy, most Thai exporters believe.

But they cautioned yesterday that Beijing might have to match its words with deeds and allow the yuan to rise more in line with market forces, since China is also one of the world's largest exporters.

China last weekend said it would scrap the yuan's fixed exchange rate following growing pressure for China to help address global economic imbalances. A yuan appreciation would accelerate imports into the gigantic Chinese market and provide wider opportunities for exporting countries like Thailand.

By doing so, China will become a more consumer-oriented economy.

Thai Rice Exporters Association president Korbsook Iamsuri said Thai exporters should keep a close eye on the Chinese currency's exchange rate to see whether it becomes stronger or weaker relative to the baht.

"China's decision to lift the currency peg resulted in a stronger baht against the yuan yesterday. Still, it will have only a small effect on Thai rice exports," he said.

The baht strengthened to 32.29 to the dollar yesterday on speculation of greater yuan flexibility.

Korbsook explained the stronger yuan would allow China to benefit from cheaper imports. On the other hand, higher imports could erode China's current account.

Yuan flexibility comes at the same time Thailand faces lower paddy supply, due to the drought. As a result, not only have rice prices in the Bangkok market increased, so have freight-on-board prices.

"The rising prices are not a direct result of the Chinese policy alone, but also the Kingdom's supply shortage. It is difficult for both rice traders and rice exporters to purchase rice now," Korbsook said.

China may import more Thai rice if the yuan is stronger. The country now imports jasmine and Pathum Thani rice from the Kingdom. The export price for jasmine rice has been quoted at US$900 to $1,000 (Bt29,100 to Bt32,300) per tonne.

Hi-Tech Group president Vallop Vitanakorn said a more flexible yuan would reflect real competitiveness in Chinese goods, because the currency had been kept undervalued for years.

"I don't think China will weaken its currency so much that it affects imports, so I'm not very worried about the policy," he said, adding that not only would Thailand benefit from a weaker yuan, so would the US, EU members and other exporting nations. Thai garment exports to China have increased in line with rising demand for medium to high-end products.

Dusit Nontanakorn, chairman of both the Thai Chamber of Commerce and the Board of Trade, said greater flexibility in the yuan would enhance Thai export competitiveness.

"Thai exports should increase worldwide, because China is a major export rival. If Chinese goods become more expensive in line with the yuan's appreciation, that will help Thai competitiveness," he said.

Thai exports to China should also benefit from the yuan's appreciation, because prices of imported goods will go down, Dusit said. However, exports will not increase significantly overnight, because the Chinese government will likely ensure a gradual appreciation.

China is one of Thailand's major export markets. Thai exports to that country increases gradually each year, accounting for 11.1 per cent of the Kingdom's export value in the first five months of this year.

Last year's share of Thai exports to China stood at 10.6 per cent.

Thai Frozen Foods Association president Panisuan Jamnarnwej said Thai products, particularly food and garments, would enjoy a better handicap when competing with Chinese goods in international markets.

Panisuan added that Thai exporters would also focus more on China because it was a better trading partner for the Kingdom and had sustainable economic growth.

Commerce Ministry permanent secretary Yanyong Phuangrach said the ministry's strategy office and Department of Export Promotion were studying possible effects from the yuan's move, in order to seek opportunities for Thai export growth to China and other markets.

-- The Nation 2010-06-22

[fiddlehead]

The baht seems to be rising again. (especially against the dollar)

I don't see any mention of Vietnam in this article.

They are the competition.

This article appears to be propaganda to me.

[chaoyang]

While it is good news, the actual amount the yuan is allowed to appreciate is tiny. A move of 0.5 percent over a year's period is seen as newsworthy. For people moving massive amounts of money that might be significant, but half of one percent as a wholesale incentive ain't much. It is now around 6.81 to the dollar and might likely have a true value of about 5 to the dollar. The question is how long that will take. And with a central government in tight control, they can easily rescind any changes at any time.

[bangon04]

While it is good news, the actual amount the yuan is allowed to appreciate is tiny. A move of 0.5 percent over a year's period is seen as newsworthy. For people moving massive amounts of money that might be significant, but half of one percent as a wholesale incentive ain't much. It is now around 6.81 to the dollar and might likely have a true value of about 5 to the dollar. The question is how long that will take. And with a central government in tight control, they can easily rescind any changes at any time.

However this thought did not prevent SuperRich from running out of Yuan yesterday. Hectic.

[Pib]

The yaun will no doubt appreciate against most currencies, to include the dollar, euro, and pound. And I'm sure this will probably result in the baht appreciating a little against the dollar/euro/pound. But the Chinese government will closely manage (slow) the appreciation....it will be like watching a snail crawl up a wall, watching grass grow, etc. I figure a few more weeks of news hype on this subject, then the daily yaun news stories won't be the headlines anymore...the news folks will find some other thing to hype up.

[chaoyang]

Maybe we should call it the Chinese Yawn.

[asiawatcher]

It is reported in the financial rags Yuan is undervalued by some 200% so once it free floats then China may have a huge swing away from its export potential. This could well help Thailand. But the US dollar is on a slide whether now or later. I particularly love the way the US keeps spending and when it does not have the money to pay - simply prints more - yep - that works! And because they are the US of A. Well like all other regimes that have gone before - British Empire, Iranian Empires, Roman Empire - it will just be another in a long line of changes. China will most likely be the next super power financially which is probably why the financial gurus are saying the Yuan is undervalued by 200%.

Everything will be revealed in the fullness of time - but right now would not be a bad idea to speculate on purchase of Yuan.

[el jefe]

China will most likely be the next super power financially which is probably why the financial gurus are saying the Yuan is undervalued by 200%.

Everything will be revealed in the fullness of time - but right now would not be a bad idea to speculate on purchase of Yuan.

Would you like to explain how you can make a leveraged bet on the Yuan for a reasonable price (up to 1 mil baht) and without an unreasonable commission?

[chaoyang]

This from the NY Times today:

Nobel laureate Paul Krugman said China's pledge to make the yuan more flexible was an "exercise in bad faith" intended to fend off international pressure for a stronger currency at this week's Group of 20 summit.

China is still undervaluing the yuan to make its exports "artificially cheap" and keep imports expensive, a policy that is "very damaging at a time when much of the world economy remains deeply depressed," Krugman wrote in an opinion piece published on the New York Times's website yesterday.

The yuan has gained 0.53 percent this week, the most since December 2008, following the central bank's June 19 announcement on abandoning a fixed peg to the dollar. The People's Bank of China had held the yuan at 6.83 since July 2008 to shield exporters during the global financial crisis.The country has "barely" allowed the currency to rise, and further movements will be "like watching paint dry," Krugman wrote. The undervalued Chinese currency fuels inflationary pressure and diverts national income to the purchase of foreign assets with a low return, he said.

---

The OP of this thread, similar to other stories carried around the world that day, shows how little people outside China understand China even today.

The country can absolutely not allow its currency to appreciate because it would cost low-skill, low-paid jobs and risk their greatest fear of all: Widespread social unrest.

I personally doubt whether the Communist Party will be able to stave off the inevitable unrest caused by its unfair social system, but they will cling to every shred of power; they certainly are not going to do anything that would risk accelerating their own demise.

As far as this being a news story of significance to Thailand: About zero.The Nation's drivel once again.

Edited June 25, 2010 by chaoyang

[junkofdavid2]

the Yuan is undervalued by 200%.

Undervalued by 200%?

If it's undervalued by even just 100%, wouldn't that mean its value is zero???

.

Edited June 26, 2010 by junkofdavid2