It is a notable economic principle that currency devaluation directly assures a more competitive global export. This is one of the reasons that China resorted to devaluing the renminbi by 4.70 percent for three consecutive days in the previous week, in hopes to bring back its exports on track.
However, most collective data recorded over the years prove otherwise. Several Asian currencies have experienced significant currency devaluation yet yielded poor export growth.
The Japanese yen has declined 17.70 percent over the year, along with which Japan issued a quarterly report of 4.40 percent decline in exports, its weakest quarterly growth in five years.
The Korean won has weakened by 0.14 percent against the dollar, which did not aid Korea’s consistent fall in its exports for almost a year.
In Taiwan, the Taiwanese dollar fell 7.50 percent over the year and a compelling 11.90 percent drop in its export was recorded.
Euro also fell by about 17 percent over the year. Germany’s June exports hit 1 percent lower than last year’s and noted just a 0.70 percent gain in totality. Italy hit 3.60 percent lower than last year’s exports, the lowest level in six years.
On the other side of the story, there are some nations that yielded a remarkable and positive export growth along with a weakening of currency value. In Europe, France’s exports grew 8.80 percent, the highest level in three years.
Meanwhile, the Hong Kong dollar has strengthened yet Hong Kong exports have improved, as far as other global exports are concerned. Hong Kong recorded a 0.50 percent monthly gain.
It is rational for the Chinese policymakers to consider devaluing its currency to boost its exports, but it is important to acknowledge other measures as well and not solely rely on currency devaluation in response to the failing economy. These data show that a weak currency is not necessarily going to improve a country’s exports. China has to do more to bring back its economy in the game. Policymakers seek to attain a consumer-led growth and a superior yuan value is conducive in materializing this goal.