Slide in Renminbi Exchange Rate Help Improve Sales of Chinese made Vehicles
After a three-day slide in the renminbi exchange rate against the US dollar, industrial experts and auto executives are expecting that the lower exchange rate will stimulate more vehicle exports. Although according to Dong Yang the secretary general of the China Association of Automobile manufacturers stated that he renminbi exchange rate is high compared to the Japanese yen and Korean won.
Since chinese carmakers are competing with Japanese and Korean car exporters, new Chinese cars used to be the same price as used Japanese or Korean cars which are now similarly priced to new Japanese and Korean cars. with the fact that the renminbi exchange against the US dollar has dropped, the rate was still high and the slide of the renminbi against the dollar will not work for Chinese carmakers.
Japan and Korea applied a series of monetary easing policies that made the Japanese yen and Korean won low when compared to the Chinese renminbi. But before any significant depreciation of the yen and won, a car trader can import a new Chinese made car for the same amount of US dollars that can be used to purchase a used Japanese or Korean made car. A new Chinese made car have a similar price tag to a new Japanese or Korean made car.
A weaker yuan will help made in China vehicle exports which have shrunk in the past couple of years and down by 14 percent in the first seven months to recover. The move to devalue the yuan help vehicle sales overseas and shipments has increased by 20 percent this year.