The Impact of the US Dollar´s Devaluation on Chinese Economy
28/04/2014 hits : 2312

The value of the Chinese currency against the U.S. dollar has been hitting record highs after rising past 7 to the dollar last week for the first time since China scrapped the renminbi's peg to the dollar in 2005. For some Chinese consumers, the devaluation of the US dollar can bring some real benefits. But analysts say the consequential negative impact on the Chinese economy should not be neglected.

Our reporter Michael Lee has the details.

Reporter: For Chinese consumers who plan to travel overseas, the devaluation of the US dollar may benefit them in an obvious way. He Ping loves traveling and she found that trips to American and southeast Asian countries, where the U.S. currency is used, have become cheaper than before.

"In the past, when I was planning my trip, my budget could usually cover 5 to 7 days. But now, the same amount of money can support me for a longer trip. I can stay in my favorite countries longer."

The same can said for Hong Kong. Since the Hong Kong dollar is pegged to the US dollar, the exchange rate of the Hong Kong dollar to RMB dropped to below 0.9 correspondingly. That is to say, expenses on shopping, accommodation and communication will decline by 10 to 20 percent if consumers choose to shop in Hong Kong now. Consumers can feel the benefit immediately when they pay with RMB.

Dai Yangyang is a product manager at an online travel agency. She says some smart shoppers have realized this.

"Some smart customers are even planning to shop in Macao. Shopping there is like enjoying a 14-percent discount after tax."

Another group benefiting from the devaluation of the US dollar is Chinese students who are going to the U.S. for further studies. Wang Jing is the general director of the American Project department in an overseas study consultant company. He says studying in the US has become much more economically reasonable.

"Tuition and living expenses for undergraduates in the US is 30 to 50 thousand US dollars per year. According to the current exchange rate, a student can save 30 to 50 thousand yuan. During four years' course, it will amount to 140 thousand yuan. This can significantly ease the economic burden of his or her family."

However, some experts say the increase in the value of RMB can have negative effects.

Zhao Xijun is the deputy director of the Research Institute of Finance and Security at Renmin University.

"It will have a negative impact on the processing and clothing industries. They are not making much money. The exchange rate, plus the rising cost for raw materials, may force them to stop exporting, switch to other businesses, and even go bankrupt."

Experts believe that the US dollar will stop devaluating in the second half of the year. The dollar-yuan exchange rate is expected to remain at 7:1 for a long time.

Michael Lee, CRI News.