Devaluation of the Chinese Yuan

[Adrian]

The financial news this morning (in the UK) is that China has devalued again (first time yesyerday).

As China supplies so many of our goods - not least model railways! - I wonder if those colleagues with experience in financial matters could comment on the implications (if any) for consumers.

My limited understanding is that the devaluation is aimed at boosting the economy by stimulating growth, in particular exports.

My Qs is, does this have any effect on the price of our imports?

Thanks

Adrian

[railsquid]

I somehow doubt any savings made in manufacturing costs through currency devaluation will be passed on to the end consumer in any tangible way. Hopefully it will reduce the inflationary tendencies in model railway pricing in the medium term at least...

[ozzie Bill.]

In my experience as a supplier to the Australian market, the big retailers used to demand an immediate reduction in their buy in price from the importer. However, this decrease rarely made it through to the consumer. The justification being that the retailer had "high overheads" and needed the extra margin to support growth and shareholder confidence. However, when the exchange went the other way, the major retailers used to refuse to accept any increases from the importer, arguing that they were not in any position to impose increases on the "poor, buying public".
Of course, this was only with the major retailers, the Aus versions of B&Q, Tesco etc. It may be different in our miNiature world, but somehow I doubt it.
Cheers, Bill

[Railwaygun]

i think its only 4%  - so no massive price cuts!

http://www.theguardian.com/business/2015/aug/12/china-yuan-slips-again-after-devaluation

the £ is strong against the €, so go Continental!

[javlinfaw7]

Are most deals with Chinese companies negotiated in hard currencies , if this is the case will the devaluation make any immediate difference?

[Newportnobby]

Probably many companies have 'hedged' their currencies i.e. bought ahead at a rate they consider favourable so I really can't see us getting any benefit

[mr magnolia]

Really?
Us ordinary punters getting no benefit from the global crooked banking world?
(hollow laugh)

[Portpatrick]

I asked myself the same question this morning.  Whatever the size of devaluation the effect will no doubt be the normal one way ratchet which applies elsewhere.  The prices to us will usually rise (by more than a revaluation?) if the pressure is upward.  And never down by the full extent of devaluation, if at all.  In other words any benefits are lost in the supply chain and extra costs passed on to the final consumer.  Or am I being, perhaps,  just a little cynical?!

[Zogbert Splod]

...Or am I being, perhaps,  just a little cynical?!

You say potato, I say tomato,
You say cynical, I say 'quite likely!'
Let's call the whole thing off.....

Sorry, Sinatra I ain't!

[Adrian]

I think, within the context of the General Discussion section ie quite separate from our modelling interests, it is legitimate to review current world affairs.

My OP was a genuine enquiry about the Chinese economy and my purpose was to seek the views of those in our community who have wider experience than me on global financial matters.

I apologise if I have misinterpreted the drift of your response to the earlier contributor - I just feel that the nature of the Qs invited contributions whatever the views of those posting and this is what Portpatrick did.

Best regards

Adrian

[steve836]

If you have read Zogbert's other posts you would know he is probably being flippant, not trying to put Portpatric down.

[Adrian]

Thanks Steve, I appreciate the tip -I wasn't sure, hence I did offer my apologies if I misunderstood what had been said.

Eternal trap of emails etc, I guess

Best

Adrian

[Portpatrick]

For the record, I was certainly in no way upset by Zogbert's comment.  Perish the thought!

I saw it as in similar vane to my own rather cynical - or was it worldly wise - comment, in the light of 40 years as a trainee then qualified management accountant, preceded by 2 years preparing for A level Economics!  (No I have no university degree).  Not to mention years of seeing, for example, how petrol and domestic utility costs go quickly up and hardly ever down in response to outside influences.  I would of course be delighted if there was an obvious downward influence on the Sterling price of our models, but I am not holding my breath.  Not least too many other factors at play - such as the upward pressure on Chinese labour costs, the probability that Dapol and Bachman will have forward rates for their Yuan.

On a different note, it could be that China in its reasonable desire to increase the living standards of its own hard working population could price itself out of the business.  Could the economics and business model move in favour of moving the whole thing either back to the UK, or to another country?  Decades ago, my late father - an electrical engineer by profession - had an idle thought that if we all earn the same we cannot afford to employ each other.  Simplistic but a kernel of truth in that.

[Sprintex]

That's the problem with posting random so-called "witty" remarks in an otherwise serious thread - if you don't include a smiley to let people know you're joking it can come across as being very flippant and dismissive


Paul

[Zogbert Splod]

Seems I have upset more than one person with my parody of a popular song.  For that I apologise.  I don't think, in the nature of my post, that a 'smiley' would have made much difference to what is being seen as a 'so-called "witty" remark'...  Despite that, my apology stands with no reservations.

I think it may well be time for me to cut right back on my flippant and so called witty remarks.....

Regards, Allan.....