Markets are still responding to the news that the chinese reminbi which had been for 2 years pegged to the us dollar by the peoples bank of China would be allowed float. Today the chinese main bank allowed the currency to appreciate by roughly +5%. Analyst are still skeptical, they are unsure whether the bank would intervene if the currency depreciates. These are uncharted water and as many analyst have reported the switch has both political and economic implications. Whether this will help shift the imbalance in trade-Global trade- is still an open question. At this point however thoughts of punitive trade measure againts the chinese by other major power has been halted.
Chinese FDI in Africa according to the world bank stands at 1.8billion dollars. They question african companies, exporter and banks with exposure to the chinese reminbi have to ask is how this will affect them. If the reminbi continues to appreciate relative to the us dollar this could bold well for exporters.The weaker chinese currency could mean that goods become cheaper and thereby encourages greater exports. But if the reverse happens the trade imbalance could get worse for most countries. Lets watch and see. Like i said these are uncharted waters………..