Item |
Price |
Unit |
Fluctuation |
PSF |
1069.59 |
USD/Ton |
0.00% |
VSF |
2058.22 |
USD/Ton |
0.00% |
ASF |
2393.73 |
USD/Ton |
0.00% |
Polyester POY |
1027.55 |
USD/Ton |
-0.30% |
Nylon FDY |
2568.89 |
USD/Ton |
-0.30% |
40D Spandex |
5604.84 |
USD/Ton |
0.00% |
Nylon DTY |
2817.99 |
USD/Ton |
-0.55% |
Viscose Long Filament |
5752.75 |
USD/Ton |
0.00% |
Polyester DTY |
1307.8 |
USD/Ton |
0.00% |
Nylon POY |
2397.63 |
USD/Ton |
0.00% |
Acrylic Top 3D |
2580.56 |
USD/Ton |
0.00% |
Polyester FDY |
1198.81 |
USD/Ton |
0.00% |
30S Spun Rayon Yarn |
2677.87 |
USD/Ton |
0.00% |
32S Polyester Yarn |
1728.16 |
USD/Ton |
0.00% |
45S T/C Yarn |
2771.28 |
USD/Ton |
0.00% |
45S Polyester Yarn |
1899.42 |
USD/Ton |
-0.81% |
T/C Yarn 65/35 32S |
2335.35 |
USD/Ton |
0.00% |
40S Rayon Yarn |
2849.13 |
USD/Ton |
0.00% |
T/R Yarn 65/35 32S |
2537.75 |
USD/Ton |
0.00% |
10S Denim Fabric |
1.09 |
USD/Meter |
0.00% |
32S Twill Fabric |
0.92 |
USD/Meter |
0.00% |
40S Combed Poplin |
1.01 |
USD/Meter |
0.00% |
30S Rayon Fabric |
0.73 |
USD/Meter |
0.00% |
45S T/C Fabric |
0.75 |
USD/Meter |
0.00% |
Source: Global Textiles
Note: The above prices are Chinese Price (1 CNY = 0.15569 USD dtd. 26/08/2015)
The prices given above are as quoted from Global Textiles.com. SRTEPC is not responsible for the correctness of the same.
The textiles industry will need six crore skilled workforce by 2022, Union Minister Santosh Gangwar said. Gangwar, who handles the Textiles Ministry, was addressing a national workshop on Integrated Skill Development Scheme. Expressing happiness at the employment of large number of women in textiles and allied sectors, Gangwar hoped that the workshop would give a new direction to the scheme. Textiles Secretary Sanjay Kumar Panda said the youth can get a meaningful employment if the right type of skill is provided. For this, he said, the skill imparted has to be of good quality and as per industry needs. As regards the organised textile sector, Panda said that there is a need to scale up production and employment, ensuring zero defect (in products) and zero effect (on environment). The Secretary said that for unorganised sector efforts are being taken to organize the trainees into Self Help Groups (SHGs) on completion of training. He said that Common Facility Centres are also being set up in order to provide the requisite infrastructure, training and design support.
SOURCE: The Economic Times
Indian Texpreneurs Federation (ITF), a body of spinning mills, today appealed to the Centre to announce interest subvention scheme for yarns and clothes exports, since interest cost was the deterrent factor for the profitability. In a letter to Union Commerce Minister Nirmala Seetharaman, ITF Secretary Prabu Damodaran said most of the small and medium sized mills were expected to make losses at the net level in 2015 fiscal and also 2016 level. Quoting CRISIL interim report recently submitted to the minister, Prabu said that the downward trend was continuing, which has significant ill effects on the mills like high piling of stocks due to fall in demand and financial crisis due to fall in exports. Stating that existing orders were undergoing re-negotiations due to devaluation of Yuan, he said that this also affected the farm sector due to delay in payment for cotton purchased by the mills. The interest subvention will give a thrust to yarn and clothe exports due to competitive pricing and the gap created by this would be filled by domestic supply and lead to benefit the suffering sector very directly, Prabu said.
SOURCE: The Economic Times
To recover losses and revive sick cooperative textile mills in the Maharashtra state, a major step being considered under the comprehensive plan of cooperative structure is whether to allow sick textile mills to sell of excess land in their possession, said textile minister Chandrakant Dada Patil. The government's share in their capital ranges from 80% to 45%. Most of them are spinning mills. Each unit has loss in tune of Rs20-40 crore. The attempt is seen as a last-ditch effort on part of Fadnavis government to breathe fresh lease of life into nearly 50 cooperative textile mills in the state – which are sick, closed or under liquidation. These mills were never given permission by the state to sell the extra land, despite repeated requests to this effect. Patil said that they expect the decision will help them recover from losses. Where selling land alone won't help, the government will chip in. The government has not yet decided on whether there should be a cap on saleable land. The government want these mills to revive as it has invested big money in them. Other the other hand, Industry experts called the plan "useless" and "impractical" as the minister possibly doesn’t know that most sick mills are located in smaller cities and towns and no mill has that much excess land which could fetch them Rs30-40 crore.
According to Ashok Swamy, chairman of the Textile Federation the government need to do something more to support the sector, which once propelled the growth of Maharashtra. Selling excess land won't help much. Out of 120-plus cooperative mills in the state, 50% are in the sick category. Those functional are also passing through tough time. The previous Congress-NCP government was in favour of foreign/private sector collaboration to revive the sector, but the plans didn't take off. The Suresh Halwankar committee had recommended closure of all sick mills to cut losses, creating an uproar in political circles. The Congress and NCP had termed the recommendation a "deliberate attempt" to destroy the cooperative sector – where both the opposition parties claim strong presence.
SOURCE: Yarns&Fibers
Textile associations across the country have decided to engage an outside agency to conduct a study of the ailing sector and present the same to the Government. Industry sources told BusinessLine that they have started the search of assigning the job to an agency. “One of them, which is already doing some work for us, is likely to submit a proposal soon,”a top official of the Southern India Mills Association (SIMA) said, adding “but that (the study) could take three months.” Meanwhile the various textile associations have decided to come under one umbrella to make their representation to the government. “We are seeking a level playing field,” asserted SIMA Chairman T Rajkumar. He said the industry expectsthe government to announce the allocation of Rs. 300 crore towards TUF very soon. “This would give some respite. The market is also improving as it normally does during this time of the year with the festive season round the corner.”
The SIMA chief stressed the need for reduction in the import duty onfibre and interest cost, among others. On issues such as delay in GST rollout, he said “this is again a worry. But until such time, the State government should considerreducing VAT and remove the market cess. We are seeking a “Textile Value Addition Policy”. “State governments should no longer encourage additional spindleage as there is excess capacity. But it looks like there could be an addition of 3 to 4 lakh spindles next year. We should strengthen the weak link in the textile chain such as processing and weaving,” he said.
SOURCE: The Hindu Business Line
A business team comprising representatives from Bangladesh Garment Manufacturers and Exporters Association and Bangladesh Cotton Association lead by Abdul Matlub Ahmad, president of the Federation of Bangladesh Chambers of Commerce and Industry visited the Indian state of Gujarat to select a garment warehousing site that will be constructed by Bangladeshi entrepreneurs to boost exports to India. They visited public and private sites in Gujarat and discussed with government high-ups and top businessmen in Gujarat ways to establish a warehouse to market clothing items across India and set up garment and yarn factories. Ahmad said that the Indian government has accepted Bangladesh's proposals and agreed to allocate lands to establish the business hub in Gujarat. Bangladesh looks to establish the hub as the country seeks to boost its annual garment exports to the Indian market to $1 billion in three years from about $100 million now.
Bangladesh has been trying to sign a deal with India for many years now to maintain a steady supply of cotton to Bangladesh as India sometimes stops the supply of the fibre without prior notice. As a result, Bangladesh's textile and garment sectors face troubles. So, they have proposed to establish some yarn manufacturing units in India so that they can spin yarn from cotton and send it back to Bangladesh for a steady supply of the raw material. The warehouse, garment factories and spinning mills would be constructed and operated by Bangladeshi entrepreneurs, India will only allocate the lands. It is also an opportunity for India to receive foreign direct investment and create jobs, Ahmad said. On the restriction by Bangladesh Bank on investing abroad, Ahmad said that the government is now much more liberal as its foreign currency reserves are close to $27 billion.
The BGMEA had demanded the 50 acres of land in India to establish the warehouse during Indian Prime Minister Narendra Modi's visit to Dhaka in June. Demand for Bangladeshi garments is high among the growing middle class in India thanks to lower prices. India is a big market for them, with an annual retail size of over $40 billion for the growing middle-class consumers, said Reaz-Bin-Mahmood, vice-president of BGMEA. Although India provided a duty and quota-free market access for all Bangladeshi goods, except 25 alcoholic and drug items, in 2012, it levied a 12.5 percent countervailing duty on garment items in the following year that hampered apparel exports to India.
According to data from the commerce ministry in fiscal 2014-15, Bangladesh exported garment items worth $104.25 million, rising from $96.26 million in the previous year.
SOURCE: Yarns&Fibers
The devaluation of the Chinese currency is expected to hurt the domestic industry as it will make Indian exports expensive in the global market, a monthly newsletter of the DIPP said. "The impact of yuan devaluation on Indian industry is expected to be threefold," it said. It said that loss in currency competitiveness against Yuan will hurt already ailing exports from India to China by making them costlier. India's exports contracted for the eighth straight month by 10.3 per cent in July to US$ 23.13 billion, pushing the trade deficit to USD 12.81 billion. "Commodities such as organic chemicals, plastics, mineral oils, copper, and cotton, etc. are likely to face greater brunt," it said adding adverse impact will also be seen on producers competing with China in the global export market.
Domestic industry will have to compete with cheaper imports from China and are likely to suffer as China's share in India's total imports is around 13.48 per cent which has almost doubled in span of ten years, the Department of Industrial Policy and Promotion's (DIPP) said. Principal commodities of imports from China to India during 2014-15 included electrical machinery and equipment (27.7 per cent); machinery and mechanical appliances (16.8 per cent); Organic chemicals (10.5 per cent); fertilizers (5.2 per cent) and Iron & Steel (4.5 per cent). "Already domestic industry viz. steel (China was the largest exporter of steel to India in 2014-15), tyres (some estimates show that share of Chinese tyre imports in overall tyre imports was more than 80 per cent in April-July 2015), etc. are suffering from cheaper imports from China and have made submissions regarding dumping by China," it added. Devaluation is likely to further hurt these industries, it said. Chinese government has devalued Yuan by around 4 per cent against US dollar in August first half 2015.
SOURCE: The Economic Times
Export Import Bank of India has on Thursday urged exporters to maintain the quality of Indian products and hedge against foreign exchange risk sufficiently, instead of worrying about increasing competition from China as it has devalued yuan to boost sagging exports. "It is still early to say anything on the impact of yuan devaluation on Indian exports. But there is no need to panic at the moment," Exim Bank Chairman and Managing Director Yaduvendra Mathur said. He said that India's exports were comparatively steady in the first four months of the fiscal than other countries and India's fundamentals continued to remain strong. The rupee came under pressure immediately after China devalued yuan and there were reports that exporters tried to cash in as a depreciating favours them. People engaged in currency speculation should be actively discouraged," Mathur said at a Ficci event in Kolkata. "This is a temporary phase and the rupee is a strong brand and investors should not panic. The fundamentals are strong." "What I feel is, by devaluing the yuan, China is trying to export away inflation and making an attempt to dent the dominance of the US dollar," he said. Exim Bank has raised $100 milion in yuan bond, just ahead of the yuan devaluation. It plans to raise about $2 billion through bonds this fiscal with around $700 million fund raising being completed.
SOURCE: The Economic Times
The Silk Association of India is planning to take up the issue of withdrawal of incentives on silk exports with the Ministry of Commerce and Industry. According to Vikram Tantia, President, Silk Association of India, the country’s silk exporters – who depend on China for availability of the raw material – will be adversely affected post withdrawal of incentives under the new export-import policy. A press release issued by the association points out that it would be inappropriate to consider silk as a non-handloom fabric and reduce incentives. “Furthermore, the incentive is extended to certain countries with important markets such as the Middle East, Australia, Far East Asia and Africa not being considered for the incentive scheme. Silk fabric exports have seen a sharp decline in the last 5-6 years and the weak trend still continues. The new policy will, therefore, seriously affect exports,” he said.
SOURCE: The Hindu Business Line
The current Chinese crisis offers a renewed opportunity for development and economic growth to India which stands out as a viable investment destination, the CEO of a group that aims to boost Indo-US ties has said. Ron Somers, a long time India watcher who drove business community's relationship between the two countries for years, believes there is a renewed confidence arising of India and the current Chinese crisis offers an opportunity for development and economic growth. "There is a renewed confidence arising across all of India - indeed, across the entire region - due to the commanding leadership being projected by Prime Minister Narendra Modi," Somers, CEO and founder of India First Group, told PTI in an interview. Based in Washington DC, India First Group is a strategic advisory firm assisting US companies as they invest in India and assisting Indian companies as they invest in North America. Before establishing India First Group, Somers was president of the US-India Business Council (USIBC).
Having recently returned from India from a two-week business development mission, Somers said it becomes very clear to any observer that in the next several months India's long-awaited Goods and Services Tax ( GST) legislation is likely to get cleared, paving way for a more streamlined tax regime that will boost commerce. Building on India's recent opening of the insurance sector, this legislation will have very positive consequences. "The Union Finance Minister Arun Jaitley is well-seized of the issue of providing clarity on retroactive taxation. With these positive signals and legislative activities coming from India, investors are heartened," he said. Somers said Modi's "Make in India" initiative is evolving into a new campaign: "Innovate in India", which will serve to attract Research and Development (R&D) and investment across the spectrum of technologies.
SOURCE: The Economic Times
Notwithstanding the recent sharp fall in retail inflation, reining in the price rise in the economy is still among the “work in progress” objectives of the Reserve Bank of India (RBI), governor Raghuram Rajan said on Thursday. The central bank’s annual report for 2014-15 noted inflation was still at the “upper end” of the RBI’s forecast. The RBI bank stuck to its forecast of a 7.6% growth in domestic product growth for 2015-16, saying growth remained below par. However, the RBI warned the government’s banking reforms would need to be swiftly implemented, adding that delays may do more harm than benefit the banking sector. “The current stress in the banking system suggests that the real economy will not wait for the banking system, and a slow pace of reform could lead to greater rather than lower risk residing in the banking system,” the report said. The central bank meets on September 29 to review monetary policy after the US Federal Reserve takes a call on whether or not to raise interest rates in mid-September. With wholesale price inflation in the negative, the Consumer Price Index ruling at sub-4% and growth faltering, there has been a clamour for a cut in interest rates. So far in 2015, the RBI has reduced its key repo rate by 75 basis points to 7.25% but has left it on hold in the previous two bi-monthly policy reviews citing inflationary pressures. The central bank said that though inflation so far has been in line with its projections, it warranted close monitoring. Retail inflation fell sharply to 3.78% in July, largely due to a base effect and a fall in food inflation. The RBI expects inflation to inch up from August onwards as the base effect wears off.
“First, economic growth is still below levels that the country is capable of. Second, inflation projections of January 2016 (as of early August 2015) are still at the upper limits of the RBI’s inflation objective. Third, the willingness of banks to cut base rates — whereby they forgo income on existing borrowers in order to attract more new business — is muted,” Rajan wrote in his overview in the report. The central bank reiterated that transmission of earlier rate cuts into bank base rates is not complete and that the central bank would wait for the reductions to be passed on by banks. “The efficacy of the monetary policy transmission mechanism needs to improve since the pass through of recent cuts in policy rate to the bank lending rate has been partial, reflecting the constraints in transmission under the existing base rate system,” the RBI report said.
Based on the PJ Nayak committee report, the government has announced various measures that would strengthen the governance and management of banks and also announced that it would infuse Rs 70,000 crore capital into public sector banks to help them manage bad loans and grow their balance sheets. It also said it would set up a bank boards bureau to oversee appointments of bankers and eventually a bank holding company to have an arm’s length approach in managing public sector banks. The RBI also said the banking sector will witness substantial change and intensified competition owing to two new universal banks and 11 payments bank entrants. The central bank would soon choose applicants for small bank licences and it aims to make the bank licence process “on tap”, the RBI said. On the existing issues of asset quality and governance, the RBI stressed that regulatory forbearance is harmful and that it would overhaul its supervision of banks by continuously rationalising regulations and by also detecting and penalising non-compliance by banks. The RBI listed various measures it has taken so far to help banks deal with stressed assets and indicated that it would monitor the effectiveness of its schemes such as the 5/25 scheme and strategic debt restructuring.
SOURCE: The Financial Express
India’s GDP may have grown by more than 7.5% in the first quarter of the current fiscal year, finance secretary Rajiv Mehrishi said on Thursday. ”The (Q1) figure seems to be in excess of 7.5%,” Mehrishi told FE. The government will release the GDP data for Q1FY16 on August 31. Indian economy grew by 7.3% in FY15. A growth above 7.5% could boost market confidence at this juncture given the fears emanating from the troubles of the Chinese economy, analysts said. “We are penciling a Q1GDP growth as a big positive surprise,” SBI Research said on Thursday. Mehrishi said the recent downside to the Indian stock market as well as the rupee was due to purely external factors. Even though the benchmark BSE Sensex has suffered a decline and rupee has breached 66/$, still the data on equity premia and the comfortable foreign reserves show that the macro fundamentals are still in a significantly better shape than they were previously, analysts say. “The current account deficit, fiscal deficit and inflation are under control, and indirect tax collection is increasing. These are signs of health of the economy,” Mehrishi said. Global rating agency Moody’s on Tuesday trimmed India’s growth forecast for the current fiscal to around 7% from 7.5% predicted earlier, citing risks from a deficient monsoon season. However, while the IMF has predicted India’s growth to touch 7.5% in the current fiscal, the finance ministry has pegged it in the range of 8-8.5% and the central bank retained its projection at 7.6% in the annual report released on Thursday.
SOURCE: The Financial Express
The international crude oil price of Indian Basket as computed/published today by Petroleum Planning and Analysis Cell (PPAC) under the Ministry of Petroleum and Natural Gas was US$ 44.28 per barrel (bbl) on 27.08.2015. This was higher than the price of US$ 42.63 per bbl on previous publishing day of 26.08.2015.
In rupee terms, the price of Indian Basket increased to Rs 2925.14 per bbl on 27.08.2015 as compared to Rs 2820.40 per bbl on 26.08.2015. Rupee closed stronger at Rs 66.06 per US$ on 27.08.2015 as against Rs 66.16 per US$ on 26.08.2015. The table below gives details in this regard:
Particulars |
Unit |
Price on August 27, 2015 (Previous trading day i.e. 26.08.2015) |
Pricing Fortnight for 16.08.2015 (July 30 to Aug 12, 2015) |
Crude Oil (Indian Basket) |
($/bbl) |
44.28 (42.63) |
50.68 |
(Rs/bbl |
2925.14 (2820.40) |
3243.52 |
|
Exchange Rate |
(Rs/$) |
66.06 (66.16) |
64.00 |
SOURCE: PIB
The next round of negotiations for the proposed free-trade agreement between India and Australia will be held here in September. "Australian and Indian negotiators are hard at work on a India-Australia Comprehensive Economic Cooperation Agreement (CECA). The ninth negotiating round will take place in Delhi this September," Australian high Commission said in a statement. It said that a high quality mutually beneficial agreement will bring growth and prosperity to both the countries. The CECA negotiations, which started in 2011, are aimed at liberalising trade in goods and services besides creating a level-playing field to boost investments. Both the countries have aimed at completing the negotiations by the end of this year.
According to a feasibility study conducted by both the countries jointly, the free trade pact is likely to result in India gaining between 0.15 and 1.14 per cent of its GDP, while Australia would end up with the gains between 0.23 and 1.17 per cent of its GDP. The two-way trade between India and Australia stood at US$ 12.12 billion in 2014-15. India's foreign investment into Australia is worth US$ 11 billion. While, Australia has invested only US$ 695.21 million during April 2000 and June 2015 in India.
SOURCE: The Economic Times
The International Textile Fair (ITF) returns to the Dubai World Trade Centre on October 11 and 12, 2015, with exhibitors coming in from Europe, Asia, Africa and Australia. “The first edition witnessed unprecedented success even during its first edition, attracting 5,173 visitors of 64 nationalities across five continents,” a press release from the organisers stated. In the previous edition, the trade show witnessed participation of acclaimed fashion houses like Carlo Pozzi from Italy and Bella Donna from UAE. Clarence Greens, a first-time exhibitor at ITF said, “It is a wonderful platform and we need to be having it more often as having visitors from around the world at our stall was great.” Dilip Nihalani, MD at ITF also added, “At ITF, we strive to provide a professional atmosphere conducive to business and networking; and acknowledge UAE's rise as the leading destination for textile industry automation.” The earlier edition showcased pre-collection Spring/Summer 2016 and Autumn/Winter 2015 highlights. With close to 150 exhibitors, the October 2015 show aims to expand with each event become a major influence on the UAE fashion scene. The organisers also added that ITF provides a professional and conducive atmosphere to business and networking for manufacturers, traders and designers both internationally and within the region. “In response to the need for a dedicated trade exhibition in UAE, the show has been designed as a quality event for the fashion fabrics business in the UAE,” they observed.
SOURCE: Fibre2fashion
The DIFS will be fully equipped with all ranges of textile products enhanced with the latest technology, will set a new definition of smart fabrics in order to satisfy the growing demand of the buyers. The DIFS brings together Exporters and Traders from all sectors of the Fabrics, Importers, Garment and Apparel Industry, Textile, Operation / Production Managers from Textile & Garment Industry, local and overseas textile & yarn manufacturers, Textile, professionals from spinning, weaving and dyeing Mills and knitting. Sumeet Industries, Gujarat based company will also be participating at the 9th DIFS, they will be available at Booth number 17 at 'Media Bazar' hall within India Pavilion at the venue, said Hemant Shah, senior manager Exports, who will also be attending the fair. They are expecting a positive response from buyers for their polyester yarns/chips and cotton yarns at the fair. Sumeet Industries, last month started commercial production of a 3,500 tons per annum carpet yarn manufacturing plant, which is expected to generate additional revenue of Rs 75 crore for the company. Over 100 exhibitors from around the world will present their up-to-date fabrics, which are ready-to-use for garment, accessories, industrial use and other various applications.
SOURCE: Yarns&Fibers
China has been so surprised by the global reaction to its currency devaluation that it is likely to keep the yuan on a tight leash in the near-term to head off a currency war that could spark a broader financial crisis, policy insiders say. Internal calls for the yuan to weaken by up to 10 percent since the Aug. 11 devaluation have faded as top leaders worry that market fears of such a move could fuel further capital outflows, signs of which have intensified in July and August. Government economists and policy advisers say the People’s Bank of China (PBOC) will now try to stop the yuan weakening much past 6.5 per dollar, which is 4.5 percent below its pre-devaluation levels. On Thursday morning, the yuan traded as low as 6.4162 per dollar. “The global reaction was bigger than expected,” said a senior economist at the cabinet’s think-tank. “The global economy is very fragile competitive currency devaluations could in turn affect China’s own economy – undermine its exports and investment.” Indeed, when cutting interest rates and bank reserve requirements on Tuesday, the PBOC said currency fluctuations had caused a shortfall in liquidity. That was seen as a signal that capital outflows had accelerated since the devaluation as market investors feared China would drive the yuan lower.
An influential economist at a top government think-tank said policymakers may have underestimated the global impact from the yuan devaluation, which happened when jitters about China’s slowdown had intensified due to a stock market plunge. “You chose the timing as the economy weakened and the stock market plunged, sending out a wrong signal to foreign countries that you want to spur the economy through devaluation and leading to competitive devaluations,” said the economist, who last month discussed policy issues with Premier Li Keqiang. “This put us on the defensive; it looks like China is the trigger.” Premier Li was quoted by state television as saying on Tuesday that there was no basis for continued depreciation.
China ran down its foreign exchange reserves by $340 billion from mid-2014 to the end of July, which some economists see as a proxy measure of outflows. No data is available yet, but analysts think the pace quickened after the devaluation. The PBOC will count on its war chest of FX reserves – still the world’s largest at $3.65 trillion – to defend the yuan from selling pressure as foreign investors flee the country and domestic investors convert yuan into dollars. The PBOC did not respond to faxed questions from Reuters about its yuan policy.
OVERVALUED
China tightly manages its currency, allowing it to trade within a 2-percentage point band above or below a daily target set by the central bank. On its own, the Aug. 11 devaluation, achieved by the PBOC setting its daily reference point nearly 2 percent lower against the dollar than the previous day, did not look like a massive move, and came with technical changes to make the exchange rate more market-determined. But it stoked concerns about just how weak the Chinese economy really was and, coming days after poor trade data, sparked fears it was to prop up the struggling export sector. Countries including Vietnam and Kazakhstan followed suit with currency depreciations of their own, and the spillover fears roiled first markets in emerging economies and then major economies. “The yuan is seriously overvalued from the trade perspective and it’s appropriate to let it depreciate,” said a researcher at the National Development and Reform Commission (NDRC), China’s top economic planning agency. “But the global impact is bigger than domestic impact.” The NDRC economist expects that after a period of stability to restore calm the yuan would weaken further, especially if the U.S. Federal Reserve starts raising interest rates. But he believes the central bank will prop up the currency for now. “The economy still faces big downward pressure. The 6.5 level should be an important bottom line.”
REFORM STILL ON AGENDA
Cao Yuanzheng, chief economist at Bank of China, estimates that the yuan would have to weaken by at least 10 percent to have a meaningful impact on exports. And China’s status as the world’s largest trading nation – it overtook the United States in 2013 – means it needs to be aware of its influence. “The renminbi is becoming an ‘anchor’ currency now. It’s stability will have a big impact on other currencies,” he said. While the PBOC still wants to free up the currency further, in part to enable the yuan to be used by the International Monetary Funds for its Special Drawing Rights (SDRs) unit of account, policy insiders say it understands the need for stability now. “The central bank hopes to push market reforms, but they also worry that there may be sharp volatility and big pressure on the yuan in the short term,” said an economist at a top government think-tank. “If the yuan falls further, other currencies may fall more sharply.”
SOURCE: The Financial Express