The Courier-Mail

YUAN-TWO HIT HAS US ON ROPES Aus­tralia hurt by China cur­rency fall

- GLEN NOR­RIS

CHI­NESE in­vestors in ev­ery­thing from Aus­tralian prop­erty to wine and beef have been hit by the sud­den de­val­u­a­tion of the yuan, rais­ing fears our big­gest trad­ing part­ner is head­ing into more eco­nomic tur­bu­lence.

China cut the yuan’s value against the US dol­lar for a sec­ond day yesterday, adding to con­cern the world’s sec­ond­biggest econ­omy is on shaky ground amid slow­ing eco­nomic growth and a slump in its stock mar­ket.

The de­val­u­a­tion sparked the big­gest two-day sell-off in re­gional cur­ren­cies since 1998.

The Aus­tralian dol­lar slipped to a six-year low yesterday of US72.16 on the China jit­ters while the ASX 200 slumped 1.7 per cent.

Com­msec economist Sa­vanth Se­bas­tian said the de­val­u­a­tion would have a neg­a­tive im­pact on Aus­tralia, which has been rid­ing a Chi­nese in­vest­ment boom.

“It will mean the Chi­nese have less to spend,” Mr Se­bas­tian said.

China’s Gov­ern­ment said the de­val­u­a­tion was part of re­forms meant to make its ex­change rate more mar­ke­to­ri­ented. But some an­a­lysts said it could spark a cur­rency war as other coun­tries de­value to make their ex­ports more com­pet­i­tive against China.

“It will start a vi­cious cy­cle by dif­fer­ent coun­tries try­ing to de­pre­ci­ate their cur­ren­cies,” said Wee-Ming Ting, the head of Asian fixed in­come at Pictet As­set Man­age­ment in Sin­ga­pore.

QUT economist Dr Mark McGovern said it was un­clear whether the de­val­u­a­tion sig­nalled se­ri­ous trou­ble for the Chi­nese econ­omy or was a strat­egy to revalue the yuan.

He said if there were fur­ther sus­tained de­val­u­a­tions it would start to have wider im-

pli­ca­tions for economies such as Aus­tralia, which have re­lied on Chi­nese in­vest­ment.

China is now Aus­tralia’s largest two-way trad­ing part­ner in goods and ser­vices, val­ued at al­most $A160 bil­lion in 2013-14.

“The Chi­nese will have less to spend on things such as prop­erty in Aus­tralia,” Dr McGovern said. “It is not a game changer but if it is part of a sus­tained de­val­u­a­tion it will start to make an im­pact.”

He said at the mo­ment the ef­fect of the de­val­u­a­tion would be muted be­cause the Aus­tralian dol­lar had fallen faster than the yuan over the past year.

Sir­romet Win­ery owner Terry Mor­ris said he was not overly con­cerned about the de­val­u­a­tion even though the Mt Cot­ton-based busi­ness ex- ports about 20 per cent of its prod­uct to China.

“It is just a mat­ter of wait­ing at this stage as the sit­u­a­tion is volatile,” Mr Mor­ris said.

He said the win­ery mainly sold to high-end cus­tomers.

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 ??  ?? GLASS HALF FULL: Sir­romet Win­ery owner Terry Mor­ris is op­ti­mistic de­spite the trou­bles in China (left).
GLASS HALF FULL: Sir­romet Win­ery owner Terry Mor­ris is op­ti­mistic de­spite the trou­bles in China (left).

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