From the Australian Financial Review today, a piece arguing that the implications for Australia of the yuan devaluation are short-term pain for long-term gain
St George chief economist Hans Kunnen:
- China will have to pay more for its imports but an increase in its more competitive exports will help stimulate the world's second-largest economy
- "We would see the benefits initially in the Chinese figures: stronger property demand and stronger steel output ... It should then come through in Australian exports. We would see it in greater demand for iron ore and gas"
- The short-term pain would be felt in Australia's manufacturing sector ... more intense competition from cheaper Chinese-made goods and exports
A warning, though, from UBS economist George Tharenou
- There are also worries a weaker yuan would have a global disinflationary effect and potentially delay the much anticipated interest rate rise in the United States
- Any such delay could add upwards pressure on the Australian dollar and make the Australian economy more vulnerable to China's weakness in the short term
There is more at the article: Weak yuan means short-term pain, long-term gain for Australia, economists say
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Makes sense at the margin ... but a positive impact for China exports largely hinges on an upswing in global demand. The US economy is recovering, Japan is seemingly slipping bakwards... lets hope Europe can be the next cab off the growth rank. Go Draghi and his QE!