RMB and ruble devaluation

In the context of global turbulence, currency fluctuations are becoming one of the key factors affecting international trade and investment. The devaluation of a national currency is the process of its depreciation against other currencies. In recent years, both the Chinese yuan and the Russian ruble have weakened periodically, causing concern among participants in foreign economic activity. In this article, we will look at what the devaluation of these currencies means and how it affects Russian-Chinese business.

What is devaluation and why is it happening?

Definition

Devaluation This is a decrease in the official or market rate of the national currency relative to foreign currency. This may occur:

• As a result of market factors (demand drop, capital flight)
• by the central bank (artificial easing to stimulate exports)

Causes of devaluation

• Inflation weakening the purchasing power of the currency
• Capital flight Decreased investor confidence
• Sanctions, Trade Wars, Geopolitics
• Declining export revenues (for example, due to falling oil prices or slowing production)
• Central bank interventionsaimed at stimulating the economy

The situation with the yuan and the ruble: a brief overview

Yuan (CNY)

• The Chinese economy is experiencing a slowdown in growth after the pandemic and the real estate crisis.
• The People’s Bank of China (PBOC) periodically weakens the yuan to support exports and offset domestic problems.
• In 2023-2024, the yuan to the dollar fluctuated between 7.0 and 7.3, while the Chinese authorities pursue a cautious policy of regulation.

Ruble (RUB)

• The ruble is under pressure due to geopolitical risks, sanctions and high dependence on raw materials exports.
• Since 2022, the Russian Central Bank has limited the circulation of the currency, but devaluation trends have intensified amid a decrease in foreign exchange earnings and an increase in imports.
• The exchange rate of the ruble against the yuan in 2024 fluctuated around 12-14 rubles per yuan, demonstrating the relative weakening of the ruble.

The impact of devaluation on Russian-Chinese business

The devaluation of the yuan and the ruble affects various aspects of bilateral relations, from trade to investment to logistics.

Trade: exports and imports

If the ruble gets cheaper:

• Imports from China rise in price Russian companies pay more rubles for the same batch of goods.
• Exports to China are becoming more profitable It is cheaper for Chinese partners to buy Russian goods.

If the yuan gets cheaper:

• Imports from China are getting cheaper - favorable for Russian consumers and traders.
• Exports to China rise in price Russian products are becoming less competitive in the Chinese market.

Outcome:

• The devaluation of both currencies is partially “mutually annihilated,” but the specific effect depends on the difference in the extent of the weakening and the currency used.

Currency risks and settlements in yuan

• More and more transactions between Russia and China yuanNot in dollars or euros.
• The devaluation of the ruble against the yuan increases the cost of imports.
• Companies renminbi loans or liabilities They face rising costs.

Example: If the exchange rate of the ruble to the yuan rose from 12 to 14, then the contract for 1 million yuan now costs not 12 million, but 14 million rubles - 17% more expensive.

Logistics and production chains

• Rising costs of importing components from China are affecting Russian production.
• Russian suppliers could become more attractive to China if their products become cheaper in yuan.
• The devaluation of the yuan does Chinese logistics services and raw materials more affordableRisks change when the rate fluctuates.

Investment and financial planning

• Investors and companies must hedge: use forwards, options, currency deposits.
• With the ruble devaluation investment in yuan assets They are more reliable (especially for Russian companies).
• Chinese investors devaluation of the yuan makes foreign investments (including in Russia) moreThis can slow down investment flows.

Retail business and consumer market

• The rise in price of Chinese goods with the weakening of the ruble causes an increase in prices in retail (electronics, household appliances, clothing).
• The devaluation of the yuan could offset this if Chinese manufacturers cut prices or offer discounts.

How to Adapt to Currency Fluctuations n

Currency diversification

• Use of multi-currency accounts (CNY, RUB, USD)
• Settlements in yuan between Russian and Chinese companies
• Storage of reserves in stable currencies

Currency hedging

• Forward contracts
• Currency options
• Fixation of courses in contracts

Flexibility in logistics and supply

• Alternative suppliers outside China
• Regionalization of production

Planning and scenario analysis

• Budgeting with different courses
• Assessment of the sensitivity of the business model to changes in the exchange rate

The devaluation of the yuan and the ruble is not only an economic reality, but also an important factor in strategic planning for all participants in the Russian-Chinese business. A weakening currency affects cost, competitiveness, logistics and investment. Companies that can respond flexibly to currency fluctuations benefit from instability. And those who ignore currency risks risk losing even if turnover grows.