The sudden drop in Chinese Yuan value has come as a shock to many in the trade industry. China devalued the rate of its currency by about 1.9% against the dollar. This drop in the rate is touted as the biggest drop since the China aligned its market and rates. The People’s Bank of China had some views on the issue to share. According to the bank, Yuan’s value and exchange rate effectiveness is still strong compared to other currencies since the trade in goods still manages to post large surpluses. It is necessary to improve Yuan’s pricing to meet the requirements of the market.
According to sources if the Yuan is dropped against the dollar there is a chance of the exports will rise and imports will go down. And the export-based growth will finally get a good boost from this move. So while most of the trade industry experts are anxious about this move, others are optimistic about it. What would be the effect of this development on the air cargo industry? The effects of the drop in Yuan on the air cargo industry were not too drastic and we cannot come to conclusions about its overall effects on China’s big airlines. Within a couple of minutes, the effects of the drop were experienced by major airlines. By the end of the day, the market worth of China Southern, Air China and China Eastern went down since investors panicked that the drop in value of the currency would increase the carriers’ debt since it is dominated by the dollar.
The effect of the drop in Yuan that was about 2% against the dollar for the air freight industry is not that relevant. Goods that are manufactured in China will be cheaper for the consumers around the world which means that exports should climb a little bit to generate an increase in the air cargo numbers. But at the same time China’s consumption of goods from around the world will see a sharp decline compared to the surge in recent years.
Source From: http://cargofacts.com/will-yuan-devaluation-help-or-hurt-air-freight/