Cheap yuan does not give the same punch anymore

By Bloomberg

Chalk up China as another example where a cheapening exchange rate is failing to lift exports.

As already seen in Japan in recent years, what textbooks say should happen when a country's currency falls -its exports gain -isn't.

Bathroom accessories maker Dongguan City XinChen Gift, is among those seeing one step forward, two steps back when it comes to the exchange rate.

“The support from a weaker yuan is negligible compared to the pressure we face from rising labour and materials costs,“ said owner Sandy Chang. "Foreign demand is down. When growth is slow in our major markets, people just don't buy.“

That tepid demand -on display in September data that showed China's exports fell 10% -means factories are yet to get a shot in the arm from a currency that's weakened 9% against the dollar since August 2015. On a trade-weighted basis, declines this year are more marked, with yuan down 6.7% versus its 4.1% drop against the dollar in 2016.