How Yuan Devaluation Affects the Chinese Economy

The Chinese media is informing the public what to expect from, and how to handle, a currency devaluation.

How Does Yuan Devaluation Affect the Zhang Sixpack? Homeowners May See Asset Values Shrink (人民币下跌对老百姓的影响如何？有房一族资产或缩水)

If the future of the RMB exchange rate to enter the depreciation cycle, will lead to a large number of international capital outflow China gamble RMB appreciation in the short term, this will lead to domestic local illiquid market and push up interest rates, resulting in house prices, stock market and other asset prices fall, affecting banks and financial system's debt security.

Devaluation of the renminbi is not conducive to foreign investment. At present, China's overseas investment is speed, but whether it is government investment or business investment, will be affected by the exchange rate. In the case of devaluation of investment dollars in overseas projects, purchase of foreign exchange to increase their cost disadvantage.

Moreover, unilateral devaluation of the RMB yuan overseas equivalent balances seigniorage, resulting in the loss of overseas yuan holders of wealth, adversely affect the internationalization of the RMB.

The article breaks down the public into different groups.

One group is the import buyers. These people will feel a loss as they see import prices rise substantially.

Second, the asset holders:

There is a "coincidence": RMB appreciation nine years, is China's real estate prices continued to rise 9 years.

2005, the RMB appreciation after starting there is a clear signal: the long-term appreciation versus the US dollar.

In theory, there is a lot of dollars into China, into RMB assets, depreciation of the dollar relative to circumvent. After entering these dollars to the existence of some form of assets.

Which is to buy more real estate. One of the reasons prices rose over the past few years is the appreciation of the renminbi. In appreciation of this process, homeowners, people, the rapid appreciation of the assets. Expected real estate appreciation, but also inspire more people desire to buy a house.

If devaluation, investors worried that the withdrawal will be assets of real estate, especially those early influx of domestic funds from abroad, due to devaluation and out of China, or did not dare to easily enter the Chinese market, a variety of factors that boost domestic housing asset prices will go away.

Overseas students: wait and see how the currency behaves; wait for a good price. (This advice is based on currency volatility, not a major long-term decline).

Tourists: if the yuan starts depreciating, convert all your cash before leaving the country, instead of using credit cards.

Investors: yuan and A-shares are correlated. A drop in the yuan will lead to a drop in equities. Aviation and real estate could suffer, utilities, telecom and healthcare may hold up better.