1 Chinese Yuan equals = 10.22 Indian Rupee.

1 us $=6.35

World's most populous country with a population of over 1.3 billion.

China is 3rd biggest country in the world in term of area.

The 1st in manpower (in term of population).

2nd economy (in terms of nominal GDP) of the world after United State of
America (USA).

Out 1.3 billion 700 million lives in rural area.

The 2011 Human Development Report shows China lies at 101 in a list of
187 countries

China's economy during the past 30 years changed from a centrally planned
system to a more market-oriented economy that has a rapidly growing private
sector and is a major player in the global economy

It refers to decline in value of a currency with respect to other currencies, which is

most of the times brought by central bank.

It should not be confused with term depreciation of currency which is a decline in

currency value due to market forces without interference of government

1.87 % weaker against US $

China is thinking a 15-20 percent devaluation of its currency by the end of 2016

China purchases billions of US dollars at a time using its currency, thereby flooding the
market with yuan, making it cheaper, and the US dollar expensive in international
currency markets.
Provides an advantage for China because with a cheaper currency, purchasing Chinese
goods is cheaper. This has made Chinese exports soar over the past years and indirectly
hurt the exports of other countries.

China manipulates its currency by setting its value lower than it is worth truly
worth.

Value of currency depends on:

(i)Relative Economic Growth (positive relationship)

(ii) Relative price level ( negative relationship)

(iii) Relative real interest rates( positive relationship)

Devaluation mainly affects the export and import.

The Chinese government claimed that its exports had fallen 8.3% in July from the previous year.

On the supply side, devaluation is clearly contractionary. Production suffers

because imported inputs get costlier following a real devaluation.

China is growing in both power and influence. It overtook Japan as the second
largest economy.
Growing at a much faster rate than Japan, about 10% annually.

A drop of 6.6% in car sales in July followed data at the weekend showing an 8% fall in exports and
slowing business investment growth in the same month.

Let us assume 1 USD = Yuan 100.Now if a good costs Yuan 200 in china, a buyer
in the US will have to pay USD 2 .Now if China were to devalue its currency to USD
1 = Yuan 200, what would happen??

Now the same product which was costing Yuan 200 in China would Cost the
American buyer only USD1 instead of USD 2.

Due to it, Chinese goods have been selling to across the world and countries find it
inexpensive to buy from China, getting economies of scale which if may pass to on to its
customers ,thereby making their goods.

Devaluation affect to the exchange rate

The first, and an overwhelmingly positive, impact therefore of a slowdown in

Chinas commodities demand on India is through lower commodity prices.

The falling yuan may force other countries to devalue their currencies.

4. China's overall impact on U.S. growth will be small.

China is the worlds biggest consumer of commodities.

As investors read the move by China as a signal that the countrys economy could be softening faster
than expected, global commodity prices plunged over the week amid fears that a slowdown in the
Chinese economy could significantly lower the demand for the products

How will Chinas currency move affect the rest of the world?
China is the worlds biggest consumer of commodities.
As investors read the move by China as a signal that the countrys economy could be softening faster
than expected, global commodity prices plunged over the week amid fears that a slowdown in the
Chinese economy could significantly lower the demand for the products.Chinas action has also
sparked fears of a currency war that could see other countries lowering their currencies as well to
mitigate the negative impact of a weaker yuan on their exports.

Here are the sectors in India that will be impacted by Chinas devaluation.

1) Textiles: The biggest sector in which India competes with China head-on is textiles. Though China
is moving on to high-end textiles, there is still a legacy segment where Indian companies can face
competition on account of devaluation. Since margins are the smallest in the lower end of the textile
segment, a devaluation of 1.9 per cent will eat into profits of some textile companies in India.
2) Chemicals: Chemicals, both organic and inorganic are largely produced in India and China. While
margins in complex chemicals are higher, base chemicals attract lower margins. Low crude oil prices
have already affected final prices, but China lowering its prices will impact Indian players.
3) Metals: Indian and global metal producers are impacted by a surge in Chinese exports. China is
already facing a number of legal cases for selling its products at lower than cost price in many
countries. Indian steel players have faced the brunt of the attack from Chinese imports. The recent
hike in import duty has been nullified by the Yuans depreciation.
4) Consumables: Most of the electrical consumables in India are imported from China. These can get
cheaper in the coming days. But Indian companies generally do not pass on the benefit but pocket the
difference. Companies who are importing their components or the entire equipment are clear gainers
from Chinas move.
5) E-commerce: Mobiles, laptops, garments, toys and most of the goods that are sold by ecommerce companies are largely imported from China. They are the ones who will not be complaining
about the fall in Chinese currency. One can expect some more mega- sale promotions being
announced by e-commerce players in the days to come.

Rationale of yuan devaluation?

In the last one year, while many other currencies have been falling against the US dollar, the yuan has
remained strong because of its link to the greenback. This has effectively hurt Chinas exports as its
products have become relatively more expensive overseas.
Last month, China saw its exports drop 8%, which added to fears that the country could miss its
economic growth of 7% this year.
So, many economists see Chinas recent currency move as part of an initiative to boost the countrys
exports to support growth.
The Chinese government is prepared to take whatever means necessary to prop up its economy to
achieve the minimum 7% growth target, MIDF Research says in its commentary.
The latest act reflects Chinas intention to boost its economic growth via a higher trade balance, the
brokerage adds.

China, on the other hand, argues that its recent currency move is moving the yuan towards a more
market-oriented system. This is because China is seeking for the yuan to be included in the
International Monetary Funds special drawing rights (SDR), which is a global reserve asset
comprising the US dollar, euro, pound and yen.