A lot of people are saying that the devaluation of the Yuan is good news for Wal-Mart.
Certainly it will help the retail giant negotiate even lower prices for its future inventory.
That definitely is good news for Wal-Mart’s customers around the world.
Certainly it will help the retail giant negotiate even lower prices for its future inventory.
That definitely is good news for Wal-Mart’s customers around the world.
But what is good for Wal-Mart may not be good for the rest
of the world when viewed from a different perspective.
Devaluing the Yuan is a great strategy for China in that it
will help bring international currency into the country when it desperately
needs it during this financial crisis. However China is already super
competitive with a lot of the world’s consumer goods originating there. The effect this will have on other countries
remains to be seen.
India, Korea and other Asian countries all produce consumer
goods as well. Will they have to lower the prices of their manufactured –for-export
goods to remain competitive with the devalued products originating from China?
With some economies struggling to remove themselves from
Third World Nation status through international trade, the devalued Yuan could
mean that industrial crime may be on the rise. If they can no longer compete
with the currency, they will need to find more “creative” ways to stay
competitive.
Apart from relying on the notorious sweat shops in regions
that produce cheap clothing in despicable conditions to maintain an edge, other
industries may resort to additional extremes. Countries focusing on industries
such as electronic consumer goods, automobiles and other methods of
transportation, food products, and natural resources may need to find ways to
cut costs to stay in the game.
One likely method is to lower quality. Another would be wage
freezes, cuts, or layoffs to hire new workers for less. Increasing production
to maximize existing equipment can often compromise human safety. Perhaps the
worst method is to resort to the improper handling of waste, including toxic waste
to avoid the cost of proper disposal.
As challenging as it is to get these countries to conform to
our manufacturing ideology, if not our personal standards of decency, as this factory collapse in Bangladesh illustrates, the
devaluation of the Yuan may have the most impact for human/workers rights and
the protection of the environment in these countries.
Today
the Yuan strengthened to 6.3936 per dollar as of 12:51 p.m. in New York. I for one, hope that the Chinese economy stabilizes sooner
rather than later.
As currency fluctuated these past weeks, I have realized that my own smart money has been safe and secure, growing and giving steady returns…elsewhere.
_________________________________________
Sources:
Lynda at Sonoran Sun | Private Equity Investments
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