According to traders, closure of custom points and the obstruction in trading routes in the aftermath of the devastating earthquake will make it difficult for Nepal to reap the benefit from Chinese currency devaluation.According to The New York Times, the People's Bank of China -- China's monetary authority -- slashed the renminbi's exchange at 6.33 per dollar on Wednesday morning, or 1.6 percent lower than the previous day. It had cut the currency's value against the dollar by 1.9 percent on Tuesday -- the biggest move in recent years.
"Depreciating Chinese currency could have affected the price of goods imported from China by 5 percent. However, customs points of Nepal, where the goods are cleared, are closed since the earthquake. Also the roads damaged by last year's Jure's landslide and recent earthquakes are yet to come into full operation," Bishnu Bahadur Khatri, chairperson of Nepal Trans-Himalayan Trade Association (NTHTA), told Republica. "Due to these problems, Nepali consumers would not be able to benefit from Chinese currency debasement."
According to Khatri, the price of Chinese goods may go up during the upcoming festive season if custom points are not opened soon. "Traders will be compelled to import Chinese goods via sea route which may drive up price of such goods," he added.
China is the second largest trading partner of Nepal after India. The latest data of Nepal Rastra Bank (NRB) shows that Nepal's merchandise import stood at Rs 92.17 billion in the first eleven months of Fiscal Year 2014/15, while the total export remained at Rs 2.16 billion. Though imports went up by 41.4 percent in the review period, exports increased by a nominal 0.8 percent.
Nepal mostly export woolen carpet, tea, vegetables, Pashmina, handicraft, Nepali paper and paper products, noodles, silverware and jewelries to China, while it imports readymade goods, telecommunication equipments and parts, footwear, and chemical fertilizers, among other goods, from China.
Bhisma Raj Dhungana, executive director of NRB, said Tuesday's weakening of Chinese currency against US dollar will not make much impact in Nepal. "At a time when the Chinese GDP is cooling, their central bank decided to devalue their currency so that its exports become more competitive in the international market. Price of Chinese imported goods may be cheaper with the devaluation of currency," Dhungana, who heads Foreign Exchange Department of NRB, told Republica. "Still, this is the short-term phenomena and the value of Chinese currency will make adjustment gradually in line with the market's demand and supply situation despite the currency's disregard toward the market's theory. So we don't need to be upbeat about it," he added.
While the value of various currencies remained volatile across the world following the decision of the Chinese central bank, the Yuan remained relatively stable vis-à-vis Nepali currency on Tuesday and Wednesday. The value of Chinese Yuan went down by 0.20 to Rs 16.29 on Wednesday, according to NRB.
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