The collapse of the yuan: How the crisis affecting China’s currency and economy will affect Argentina

The worst economic data for August came from China, where exports and industrial activity fell for the fourth and fifth straight months, respectively, after a price deflation recorded in July and amid severe problems in the sector. The construction, already the largest real estate developer in Asia, has led Evergrande to file for bankruptcy in the United States, sending the yuan, or renminbi, as the Chinese currency is officially known, to its lowest level in recent years. 16 years on Thursday

The value of China’s currency has plummeted and now requires 7,326 yuan per dollar, higher than the figure reached during periods of strict lockdown due to the “Covid 0” policy. And the highest since 2007. Thus, the yuan has accumulated a depreciation of nearly 6% against the US currency so far this year.

The first impact in Argentina was a drop in the dollar value of the BCRA’s total reserves, as the “swap” of pesos for yuan with the People’s Bank of China, known as the country’s central bank, is halved.

The Chinese economy’s woes are also reflected in the weakness of its imports, which fell 7.3% last month, after a very strong 12.4% drop in July.

An analysis by consultancy Oxford Economics said the “spillovers” from a Chinese trade slump could be “significant” for various industrial sectors of its trading partners and could even affect commodity prices.

China is Argentina’s second most important trading partner, almost tied for first with Brazil. In the first 7 months of the year, Argentina’s exports and imports with Brazil amounted to 11,127 million US dollars and with China 11,122 million dollars.

Additionally, according to a recent report from the Rosario Stock Exchange, China is the main destination for exports from six Argentine provinces: Entre Ríos, Chaco, Santiago del Estero, Catamarca, San Luis and La Pampa.

For example, the Asian giant is a major buyer of meat from Argentina, absorbing three-quarters of the country’s beef exports.

Some analysts are already talking about the risk of “Japanization” of the Chinese economy, referring to the stagnation and very low growth rates of the Japanese economy in the 80s of the last century, some Japanese purchases of high index value in New York, like Rockefeller Center, created a certain psychosis in the North, in some Hollywood movies of that time. As a result, Japan “ate” America economically.

Now American fears are of a geostrategic nature and manifest in a significant geopolitical rivalry between Washington and Beijing. One of the latest proofs is the visit of the US Secretary of Commerce. Gina RaimondoDuring his visit, he dared to declare that China had become “uninvestable,” meaning that foreigners could not or should not invest.

While challenging and attacking the Chinese regime, Raimondo’s words describe what is really happening. China received $576,000 million in foreign financial investment in 2019, but has since been hit by an economic slowdown, rate hikes in the United States and a strategic conflict with Washington — including fears of a Chinese invasion of Taiwan. A very strong backlash. According to Joyce ChangA JP Morgan analyst was quoted as saying: Financial TimesAbout $250 to $300 billion of investments in Chinese stocks or bonds have left the country in recent years.

In this context, moreover, the BRICS group (for Brazil, Russia, India, China and South Africa), in which the Chinese GDP is double that of the other partners, together with Argentina and five other countries (Egypt, Ethiopia, Iran, Saudi Arabia and the United Arab Emirates). 2024 onwards, but on the other hand, China’s President Xi Jinping will not be attending the G20 summit in New Delhi, India this weekend.

Xi’s defeat (the first time a Chinese premier has not attended the G20 summit since it began in 2008) could hurt his arch-rival in Asia and BRICS’s second-largest ally, India. In fact, India Today, one of the world’s most populous countries, even speculated that Xi Jinping’s absence may be due to his failure to resolve the dispute, under fire from top Chinese Communist Party leaders. Current economic crisis.

President of Argentina Alberto FernandezHe will be among the participants at the G20 summit in India, where there is a lot of buzz about the government’s intentions. Narendra Modi As Turkey did last year, the country’s official name should be changed.

Like Turkey in NATO, India plays a balancing role in BRICS. President in Ankara, the capital of Turkey Recep Tayyip ErdoganAfter being re-elected in May on the back of a populist campaign, he appointed a new finance minister and central bank chief, abandoning his previous stance of keeping interest rates low, which have risen from 8.5% to 25%, and he set out a 78-page plan to reduce annual inflation to single digits by 2026. published

The Turkish leader considered inflation ending in 2023 to be a very high rate of 65%, even by Turkey’s standards, which has many crises and changes in the course of economic policy and striking synchronicity with events in Argentina.