China’s Currency is all over the news...and you might be wondering if there’s any relationship between you and the Yuan. Well the devaluation is intended in part to help make China’s exports more attractive to the rest of the world.
That could mean some of those “made in China” goods you purchase become a little cheaper. But a Syracuse University Finance expert is not so sure. Whitman School of Management Professor Tom Barkley says prices could drop in theory...but only if retailer and importers play along.
“As these imports become cheaper for us, I don’t know if that will translate into lower prices for our consumers. Many of these goods are coming through places like Walmart for example. If they don’t actually decrease prices then it means Walmart makes a bigger profit.”
So cheaper goods for you?...maybe, maybe not. It might have more of an immediate impact in your 401-k or other investments. For investors, Barkley considers it a short term hit, even though the stock market lost more than one percent reacting to the news Tuesday. Though he notes many investors might have money in China, even if they don’t know it...but there’s no reason to pull out.
“401-k’s invested in emerging markets in general, a lot of them have been slanted toward china because of its incredible growth rate over the past decade. China in fairness, has come a long way. They are the second largest economy in the world. As an investor you need to be paying attention to those opportunities, you can’t just ignore them completely.”
Barkley believes drops in the stock market the last few days after China devalued its currency will be short term...the country’s economy is still growing.
Local businesses trying to capitalize on exports face bigger obstacles.
“This does set exporters, US exporters and local exporters, back quite a bit. If you’re relying entirely on exports then this is huge. If 90 percent of your business is in the state of New York and in the US, then it’s probably not going to bankrupt the company.”
Barkley agrees there’s a political dimension to the currency move. Washington politicians criticized China, Chuck Schumer for example called it a game that leaves U-S workers hung out to dry. But Barkley doesn’t expect any policy changes that limit trade with China anytime soon.