Chinese seafood companies are embracing an export strategy once again to insulate themselves from a weaker currency at home.
China’s renminbi is currently at a six-year low against the U.S. dollar, and mounting expectations of further devaluation is worrying China’s exporters, according to executives from several Chinese seafood companies in attendance at the 2024 Seafood Expo Global in Barcelona, Spain.
The chief executive of one Guangdong-based firm, who requested anonymity due to the sensitivities of abiding to government currency controls, said currency hedging is motivating China’s seafood sector to initiate a new push on exports. The executive said some of his company's funds are kept overseas in foreign currency.
“A weaker renminbi means Chinese exporters’ operating costs go down relative to their sales price, and that means we can lower prices in our sales currency – dollars,” the executive told SeafoodSource.
Charging lower prices to export clients allows the firm, which exports processed shrimp and tilapia, to increase sales volume and take market share, according to the executive.
“We have talked with several American customers about lowering the price for them in order to increase the orders,” the executive said.
A weaker currency could mean production can rise. However, China’s government has, in recent decades, sought to increase self-reliance in a range of products – from electronics to electric vehicles to seafood – to satisfy local demand and bolster domestic production for export markets.
There are signs that China’s government is comfortable with a weaker currency, as Beijing has shown a reluctance to make policy changes and roll out stimulus funds to shift China’s economy away from investment as an engine of growth and toward greater consumption.
But, cutting back on investment – including government subsidies for key industries – may undercut the government’s goal of making China the leading manufacturer of electric vehicles, renewable energy technology, and high-tech products, as outlined in its 10-year Made in China 2025 plan to achieve self-reliance, innovation, and strength in the manufacturing industry within the next decade.
Western businesses like a weakening renminbi if they’re processing goods in China, as it means they’re paying in a weakening currency and selling goods in a strengthening one. However, for Chinese processors who have to buy in dollars, a weaker renminbi is painful, and for Chinese consumers, imports become more expensive.
