Monday, September 7, 2015

Can Africa Benefit from Devalued Chinese Yuan?

The National Law Review, an open source database, published on 4 September 2015 a commentary titled "China Sneezes: Could Africans Benefit from a Devalued Yuan?" by Ashwin Kaja, associate at the Beijing office of the international law firm Covington and Burling. 

On the negative side, the author notes a weakened yuan could result in decreased exports of African goods to China and increased imports of Chinese goods by Africa.  Some African countries, on the other hand, particularly those that import Chinese capital goods, may benefit from a weakened yuan as the cost may go down. 

The situation is complicated because most African countries use U.S. dollars instead of yuan when trading with China.  This makes it more difficult to determine the impact of a devaluation on Africa-China trade.  Whether the yuan actually devalues relative to African countries will depend on a country-by-country analysis when the dollar is used for trading.

If China's economy is now growing at a lower rate than the officially proclaimed 7 percent, Africa's and the entire global economy are likely to be impacted negatively. 

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