1300% currency exchange losses for Chinese companies

Chinese yuan experienced 4.5% drop in 2015.

The combined profits of around 980 listed companies in China experienced losses as a result of currency exchange fluctuations, to the tune of ¥48.7 billion in 2015. This was nearly 13 times of the amount reported in 2014. Sectors suffering the largest losses include airlines, real estate, oil and gas, metal and mining, as well as technology.

The strength of the US dollar (USD) contributed to a 4.5% drop in the Chinese yuan (CNY).

“The Chinese economy is facing a strong set of challenges,” says Carl Hasty, Director of international payments company Smart Currency Business. “China is experiencing an economic slowdown amidst growing global economic risk. This causes volatility in currency exchange markets, and can have an effect – sometimes adverse – on companies’ bottom lines.”

“There are high chances for the yuan to depreciate this year with rising volatility,” says Cheng Shi, Co-Head of Research at ICBC International Research Ltd.

The People’s Bank of China (PBoC) has embarked on achieving a convertible, freely-traded currency by the end of the decade, in order to compete with the US dollar. China also faces competition from the US on exports. Although the former participates in more than 10% of world trade, the yuan is only used in about 3% of payments worldwide.