How to avoid China’s currency collapse with a little foresight
The global financial crisis, which began in 2007 and is still ongoing, is causing a lot of problems for people in China.
It’s also creating a lot more opportunities for Chinese companies to expand their business operations overseas.
One of the biggest challenges is how to ensure that there’s no sudden spike in Chinese yuan or other currencies.
So, the question of whether China can handle the crisis has come up again in recent months, especially after Chinese President Xi Jinping visited Beijing this past month and pledged to make sure that China has the proper tools to manage the global economy and manage its economic slowdown.
That means building up its economic infrastructure, building up manufacturing capacity, building in infrastructure and ensuring that the central bank keeps a steady hand in managing the currency.
In order to avoid the collapse of the yuan, companies and individuals have to have a plan for when the crisis might occur, according to experts from China’s financial and business sectors.
For companies, it’s important to plan how they’ll invest in their businesses and the way they will pay back their debts, said David Heng, a former U.S. Treasury official who is now at China Global Business Research Institute.
To businesses, the best way to prepare for the crash is to have an idea of what the currency will be worth at that time, and how much it’s going to affect their operations, said Zhang Wei, a senior vice president at the China Merchants Bank in Hong Kong.
“It’s better to be prepared than to be unprepared,” he said.
Companies and individuals must also plan for the possibility of a currency collapse, and that means developing strategies to reduce the risks of inflation and capital outflows, said Yan Tiankai, a professor at Beijing Foreign Studies University.
But for individuals, this means making sure they understand what currency will happen and what they can do about it, said Li Jian, a partner at Shanghai Investment Group.
For example, if you need to transfer money between China and overseas countries, you should plan to change your bank account and transfer it into a different bank account.
And if you want to buy something overseas, you’ll need to buy from the Chinese online marketplaces, Li said.
“Be more vigilant than ever,” he added.
Investors have also been looking at ways to reduce their exposure to the yuan.
For instance, many investors have been investing in stocks that are expected to fall in value as China’s economy continues to slow.
That will lead to lower investment returns for companies and lower demand for their goods, experts said.
Investors have also started to shift their risk to China’s stock markets.
Many of them are using hedges to reduce exposure to a market that’s now down more than 50 percent from its peak in 2013, according, a Bloomberg Intelligence report.