The yuan’s biggest decline among Asian currencies this year is giving Chinese exporters an advantage as a rebound in shipments comes at the expense of companies in South Korea, according to Morgan Stanley.
The CHART OF THE DAY shows China’s exports are forecast to increase 6.6 percent in May, based on a Bloomberg News survey, while shipments from South Korea fell 0.9 percent last month in the first contraction since January. The yuan has weakened 5.9 percent against the won and 3.2 percent versus the dollar in 2014. The nation’s compete in overseas markets in products such as semiconductors, steel and mobile handsets.
“The falling yuan leads to increased competitiveness of Chinese exports,” said Sheena Shah, London-based foreign-exchange strategist at Morgan Stanley. “This puts Korean exports at a disadvantage.”
The won rallied 4.3 percent versus the dollar this quarter, the most among 31 major currencies tracked by Bloomberg, making its exports relatively more expensive in local-currency terms. The yuan has depreciated 0.6 percent in the same period.
Exports from China, which reports last month’s figures on June 8, accounted for 27 percent of its gross domestic product in 2012, while in South Korea the proportion was 57 percent, according to the latest World Bank data. Chinese overseas sales have recovered from an 18.1 percent drop in February, the worst slump since 2009.