Cross-border trade slows due to renminbi fluctuations

Fluctuations in the value of the renminbi are having an adverse effect on China-Myanmar cross-border trade traders in Muse have told The Myanmar Times.

China’s renminbi is the currency of choice for trade in the border region and a 10 percent drop in value is enough to cause businesses to lose money on deals, say traders in the area, adding that they would prefer for the currency to remain stable.

“We can’t make predictions as the Chinese renminbi rises and falls quickly. Businesspeople do not like unstable situations. They can’t buy immediately and sell immediately. If the currency value falls, it is not cost-effective for both exporters and importers. Real traders want stable currencies,” said U Lin Yaung Htein, a trade based in Muse.

Among the reasons for the renminbi’s recent weakness are the trade sanctions imposed by the US on China amid an intensifying trade war between the two countries. This has dampened US demand for goods from China, which also decreases demand for renminbi to pay for those goods.

The People’s Bank of China also announced that it would cut the reserve requirement ratio for commercial banks by 1 percentage point, effective from October 15. The central parity rate of the Chinese currency renminbi, or the yuan, weakened 165 basis points to 6.8957 against the US dollar Monday, according to the China Foreign Exchange Trade System, the lowest since May last year.

As a result, the Chinese currency is now weaker against the kyat. This means Myanmar traders can buy fewer goods for the same amount of renminbi than they could before or the goods they sell become more costly in renminbi.

Last month K100,000 was worth 425 yuan, however, the same amount has been worth 450 yuan in recent days.

Business owners in the Muse area say they see improved trade when the currency is stable and declines when it weakens with smaller volumes of products bought and sold.

“Most of the merchants do not make deals when the currency rate is unstable,” said Ko San Main, a merchant from Muse.

SOURCE: MYANMAR TIMES

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