Shake it off

Alud Davies
By Alud Davies August 21, 2019 09:51

Shake it off

In the latest escalation of the US-China trade war, President Trump has accused Beijing of manipulating its currency which, the Trump administration claims, is giving China an unfair trade advantage.

The last time Washington accused Beijing of manipulating its currency was in 2015. China’s central bank devalued the renminbi (RMB) by close to 2% against USD, in an attempt to boost exports.

The dollar value dipped below the psychological 7 RMB barrier on August 5 this year. The last time it was below 7.00 was in 2009.

The weaker exchange rate makes Chinese good cheaper to buy in US dollars. In the reverse, it also makes US imports into China more expensive.

According to a US Department of Treasury report, published on August 5, “China has a long history of facilitating an undervalued currency through protracted, large-scale intervention in the foreign exchange market. In recent days, China has taken concrete steps to devalue its currency, while maintaining substantial foreign exchange reserves despite active use of such tools in the past.”

The report goes on to state that “… the purpose of China’s currency devaluation is to gain an unfair competitive advantage in international trade.”

Although Washington was due to talk with the International Monetary Fund (IMF) about its allegations, an IMF report published on August 9 contradicts the US findings, stating that “Estimates suggest little FX (foreign exchange) intervention by the PBC (People’s Bank of China).”

New business-jet sales into China have slowed in recent years, mostly due to uncertainty about market conditions.

In its 2018 year-end fleet report, Asian Sky Group said that only 24 new business jets were delivered to the Chinese mainland during 2018. And that figure’s not likely to increase this year. The AMSTAT database says that fewer than five new aircraft have been delivered to the mainland so far this year.

According to Paul Jebely, managing partner for law firm Pillsbury Winthrop Shaw Pittman (HK) LLP, the trade war has had a “chilling effect” on the market, specifically on US products.

“A trade war and strong dollar do not exactly make ideal conditions for new aircraft ordering,” he says.

Alud Davies
By Alud Davies August 21, 2019 09:51

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