China Tops Treasurers’ List Of Worries

A new survey by JPMorgan finds corporate treasurers consider China’s recent currency exchange rate reforms to have had the most impact on their businesses.

Reports on Thursday (Sept. 29) said the report also found that China’s economic slowdown stands as the most concerning issue for corporate treasurers whose companies have a market capitalization of more than $3.2 trillion. China’s economic slowdown surpassed U.S. interest rates and emerging markets slowdown as top issues.

“Clearly, FX risk is a key concern for cash managers, but we are positive on China and the gradual internationalization of the currency,” said JPMorgan Head of Global Corporate Banking for Asia-Pacific Muhammad Aurangzeb in a statement.

Last year, the People’s Bank of China made an adjustment to the Chinese yuan (CNY) reference rate, which has seen a 7.4 percent depreciation against the U.S. dollar since, according to reports. JPMorgan added that China’s FX reserves have shrunk by $460 billion.

All of this occurs as China works to make the yuan an international currency.

“The inclusion of the CNY into the International Monetary Fund’s SDR basket from October is a key testament to the currency’s growing global importance,” added Aurangzeb.

But survey respondents agreed that the CNY is likely to continue its depreciation against the U.S. dollar towards the end of the 2016. Aurangzeb acknowledged treasurers’ concerns over China as legitimate.

“This is the second year where China’s slowdown has emerged as a top concern for treasurers attending our forums, and that’s not surprising given the dominant role the Chinese economy plays on the global stage,” the executive said. “However, China’s slowdown is primarily due to the economy transitioning from an investment and export-led growth model to one that is driven by services and consumption.”

“We see that as a positive development as the latter is ultimately a more sustainable growth path for China in the long run.”