Yuan bounces back, to dismay of Chinese seafood exporters
China's national currency, the yuan (also known as the renminbi or RMB), is appreciating against the dollar, forcing Chinese seafood vendors into taking a second look at the country's domestic markets.
The yuan appreciated 1.5 percent against the dollar in March, which has changed market sentiment to expect a more stable currency. This is not a new trend, as the appreciation of the yuan has been sharp over the past decade; yuan-to-dollar exchange rates went from 8.3 to 1 in 2005 to about 6.8 to 1 presently.
Though some high-profile U.S. policymakers have long claimed China’s currency is undervalued to boost exports, there are others who foresee a significant depreciation of the yuan. These progonsticators believe China will print vast sums of RMB to deal with bad debt in its banks and local governments, resulting in the yuan reverting to its 8.3-per-dollar rate and dropping even further as the U.S. Federal Reserve strengthens the value of the dollar through interest rate hikes.
However, for now at least, China’s currency does not look likely to depreciate against the dollar. Even though high-profile hedge funds had taken bets on a significant devaluation, China’s foreign exchange reserves were up by USD 10.3 billion (EUR 9 billion) to USD 3.21 trillion (EUR 2.82 trillion) in April, thanks to the slight appreciation of the currency.
The yuan has been boosted by mass inflow of funds as the currency appreciated since 2005, but those funds are now leaving the country as investors are tempted by higher interest rates in the U.S.
Now the Chinese government is fighting devaluation, fearful of the wrath of Chinese savers and the middle class, who would see their wealth evaporate if the yuan is significantly devalued.
Chinese seafood exporters have suffered from a stronger Chinese currency, though the stronger buying power of the yuan has been a boost for imports. The strength of the Chinese currency has been listed in the earnings reports of companies like Baiyang and Guolian Aquatic as a reason for declining fortunes of the country’s seafood exporters.
The larger trend seafood companies in China is that, tired of the currency swings, many have been set aside expanding exports and are now primarily focused on growing domestic sales.