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CHINA: "China Auto Demand Slows as Low-Content Car Segments Fall (April 2015)" report

CHINA: "China Auto Demand Slows as Low-Content Car Segments Fall (April 2015)" report. 8-page report by BAIRD.

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back to index backCHINAtalk March,  2017


For China’s Factories, a Weaker Currency Is a Double-Edged Sword

At first glance, given the way that China controls its currency, the Guangdong Chigo Air Conditioning Company might seem like a winner.

For the past three years, China has allowed its currency, the renminbi, to weaken in value compared with the American dollar. On paper, that should bolster Chigo’s profits. Half of its $1.2 billion in annual sales come from abroad, mostly in dollars, and a weaker renminbi gives Chinese companies an advantage when they sell their products in other countries.

Yet the renminbi’s slide has provided only a marginal benefit, said Li Xinghao, the company’s founder and chairman. Big Western department store chains have learned to pit manufacturers against one another — and China is full of air-conditioner manufacturers. When the renminbi weakens, the chains simply tell factory bosses to cut their prices or lose the business to another Chinese factory.

It only brings benefits for the first month,” Mr. Li said. For the next month, clients are recalculating what they’ll pay. The supply is much greater than demand, so profits can’t go up.”

The renminbi is likely to be a major topic behind closed doors as Chinese lawmakers gather beginning on Sunday for the annual meeting of the National People’s Congress, the top lawmaking body in the country. President Trump had heavily criticized China during the campaign, saying that Beijing for many years used an artificially weak currency to unfairly help its businesses and steal American jobs.

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Source: New York Times - GAI





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