China, in August 2015, had devalued its currency yuan against US dollar.
This devaluation had sent shock waves through global markets.
Analysts contended that China is devaluing its currency to improve its export competitiveness.
This move, many argue, will have far reaching ramifications for emerging countries like India.
But If you analyse the effects and Other possible Factors , we can say that Yuan devaluation might have very little or no effect on India.
Foreigners cannot be attracted to Indian equity markets because of the poor state of the Chinese market.
Foreign investors will buy Indian paper on the basis of its valuation and on the basis of macroeconomic expectations, and not because China is having a crisis
Yuan devaluation will have a limited impact on India’s export competitiveness because of the little overlap between the countries.
Yuan devaluation is too small to make a significant difference.
Petroleum products and jewellery account for roughly 30% of India’s exports. In contrast, over 40% of China’s exports are mechanical and electronic goods.
Further, unlike India, where agricultural products account for 10% of exports, China exports little or no agricultural produce.
This lack of product overlap reduces potential gains or losses on account of fluctuations in the value of the yuan.
Exports of India and China can be compared as per below:-
This devaluation had sent shock waves through global markets.
Analysts contended that China is devaluing its currency to improve its export competitiveness.
This move, many argue, will have far reaching ramifications for emerging countries like India.
But If you analyse the effects and Other possible Factors , we can say that Yuan devaluation might have very little or no effect on India.
Why We Say So ???
Foreigners cannot be attracted to Indian equity markets because of the poor state of the Chinese market.
Foreign investors will buy Indian paper on the basis of its valuation and on the basis of macroeconomic expectations, and not because China is having a crisis
Yuan devaluation will have a limited impact on India’s export competitiveness because of the little overlap between the countries.
Yuan devaluation is too small to make a significant difference.
Petroleum products and jewellery account for roughly 30% of India’s exports. In contrast, over 40% of China’s exports are mechanical and electronic goods.
Further, unlike India, where agricultural products account for 10% of exports, China exports little or no agricultural produce.
This lack of product overlap reduces potential gains or losses on account of fluctuations in the value of the yuan.
Exports of India and China can be compared as per below:-
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