Recently, the value of RMB has decreased. This decrease can have a huge impact on the Chinese economy. There are five major industries that can be affected by this devaluation:

• Clothing industry: The devaluation can stimulate its output.
• Steel industry: Steel exports will increase, promoting the domestic market.
• Shipping industry: Steel and clothing exports will increase consumption of transportation, promoting the shipping industry.
• Chemical industry: The import cost of chemicals will increase, but this will benefit exports of chemicals, stimulating GDP.
• Automobile industry: The price of imported cars will increase, reducing demand for imported automobiles and increasing the competitiveness of domestic automobile manufacturers.

(http://www.wantchinatimes.com/newsphoto/2013-04-18/450/97706_9560400B19.8B19CL31H_2012%E8%B3%87%E6%96%99%E7%85%A7%E7%89%87_copy1.JPG)

Despite these benefits, consumers’ buying power will decrease, and therefore their living standards will decrease. In addition, social welfare will likely be unfavorably impacted. Further, China’s foreign-currency reserves will decrease, negatively impacting the balance of payment. Export prices will fall in the long term, and confidence in the economy may be affected in the short term, possibly because of a fear of further devaluation.

W. Lin