The People’s Bank of China
devalued the yuan by 1.9 percent against the U.S. dollar, sending the currency
to a four-year low, in a move to boost exports following a run of poor economic
data, according to Reuters. A cheaper yuan will help Chinese exports by making
them less expensive on overseas markets, especially Vietnam, where Chinese
goods of all kinds are widely available at already low prices.
Vietnamese manufacturers and exporters are scratching their heads over fears that they will have to cut prices, while Chinese imports will become far cheaper.
For Vietnamese cashew exporters,
the devalued yuan is a double whammy, as the depreciation came after China
increased the value-added tax for the product, one of Vietnam’s staples, from
five percent to 13 percent, according to the Vietnam Cashew Association
“I was still wondering why they
hiked the VAT when I learned of the yuan devaluation,” Vinacas chairman Nguyen
Duc Thanh told Tuoi Tre (Youth), after returning from a cashew exporter meeting
in China. With the cheaper yuan, Chinese importers have to pay more for signed
contracts with payments in U.S. dollars.
“For instance, while Chinese
firms paid 48,880 yuan for an $8,000 contract to import one metric ton of
Vietnamese cashews, the amount of money is now 49,840 yuan,” Thanh elaborated. “The
importers thus have to either hike their selling prices or demand the exporters
lower their quotes to offset the extra cost.”
While Vietnamese cashew exporters
used to be able to increase the prices of shipments to China at this time of
the year, with the Mid-Autumn Festival nearing, Thanh is pessimistic about them
not having the chance again this year. Insiders from the seafood and
agro-produce exporting sectors also say the biggest concern is that Chinese
importers will buy from other suppliers at lower prices, as Vietnamese goods
will become more expensive.
Many countries, including
Singapore, Thailand, Japan, South Korea and the Philippines, weakened their own
currencies immediately after China announced its devaluation of the yuan on
Tuesday. These countries are both major markets and rivals of Vietnamese
exporters of rice and seafood, according to industry insiders.
More than 90 percent of
Vietnamese seafood exporters choose to complete payments in U.S. dollars, and
the devaluation of other currencies against the greenback would only exacerbate
the situation, according to the Vietnam Association for Seafood Exporters and
Producers (VASEP). “Vietnamese catfish will be under pressure to cut prices to
enter China in the future,” VASEP general secretary Truong Dinh Hoe said.
“In the meantime, Vietnamese shrimp will also be more expensive than shipments from Thailand, Indonesia and India, and the importers will of course choose suppliers with the cheaper prices.” Other economic experts are concerned that Vietnam’s trade deficit with China will widen as Chinese imports become cheaper.
“The yuan devaluation affects
both the import and export activities of Vietnam with China, worsening the
trade imbalance,” Associate Professor Tran Hoang Ngan, a prestigious economist,
said. Vietnam posted a trade deficit of $28.8 billion with China in 2014,
according to the General Statistics Office. The trade gap in the first seven
months of this year was $20 billion.