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19 Oct 2011

International Economy

China-US Currency Dispute: Limited Impact on Thailand (Business Brief No.3190)


KResearch views that controversy between USA and China on the relative value of the Chinese Yuan (after the US Senate's passed the Currency Exchange Rate Oversight Reform Act, allowing their authorities to implement retaliatory tariffs on imports from countries that are deemed to be currency manipulators) will likely be limited because USA and China still depend on each other. If the economic and political confrontation between these two powers becomes severe, it could aggravate the worsening global economic situation.
Although the Chinese Yuan will likely appreciate due to such pressure, China's potential as the key production base will likely continue, as seen in the Chinese export value that is higher than that of Germany, placing China as the world's top exporter with a share of around 10 percent of global exports. In addition, it seems that no country can easily replace China's key status within the short term. As a result, retaliatory moves by either China or USA should not be severe, thus resulting in limited impact on Thailand.
However, Thai businesses should closely monitor this controversy for timely adjustments and bracing for possible risks. Also, they will need to urgently enhance their competitiveness in quality, brand image and cost management to effectively retain the status of our products in those key export markets.

International Economy