Chinese firms switch to dollar as the yuan wobbles
CHINESE TRADERS and investors have recently switched to greater use of the dollar as they manage their exchange rate risks stemming from highly volatile and weakening of the yuan, Suwatchai Songwanich, chief executive officer of Bangkok Bank (China) Co Ltd, said.
They have apparently changed their minds about using the yuan, which has been promoted by the Chinese government as an internaฌtional currency.
Because of the weakening of the yuan, Chinese businesses want to hold on to the dollar rather than the yuan, he said.
The Chinese and Thai governฌments have jointly promoted the use of local currencies – the baht and the yuan – for trade and investment between the two countries. Their efforts have increased the yuan portfolio from less than one per cent base to about one per cent of Bangkok Bank’s total portfolio, he said.
Transactions in the yuan currency is subdued now as businessฌes prefer the dollar, Suwatchai said.
He, however, believed that once the value of the yuan stabilises, busiฌnesses would once again deal in the currency. China has organised several trade missions in order to look at increasing trade and investment with their Thai counterparts, he said.
China uses a fixed exchange rate regime while Thailand has opted for the managed float since 1997.
The two sides previously thought of using their own currencies for trade and investment, as it would reduce cost and risk. However, the current situation points to a change in direction. The baht was also highly volatile. Thai exporters are concerned about the rapid appreciation of the baht against the dollar, by about 5 per cent, compared to the yuan’s rise against the greenback of about 2 per cent yeartodate.
Meanwhile, Chinese investors are interested in investment opportunities in the Eastern Economic Corridor, he said.
