World View: China’s Yuan Devaluation Causes Currency Chaos in Asia

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The Associated Press

This morning’s key headlines from

  • Slovakia will accept 200 migrants — but only if they’re Christian
  • China’s yuan devaluation causes currency chaos in Asia

Slovakia will accept 200 migrants — but only if they’re Christian

Syrian migrants leave from Bodrum, southwest Turkey, early on Wednesday, hoping to reach Greece's Kos island (AFP)
Syrian migrants leave from Bodrum, southwest Turkey, early on Wednesday, hoping to reach Greece’s Kos island (AFP)

With the European Union receiving hundreds of thousands of migrants, mostly arriving in Greece and Italy, the European Commission has been trying get agreement from the member states to agree to resettle the migrants equitably. On July 20, the Commission reached agreement on resettling 40,000 migrants to different countries. However, even that low target has not yet been met, as individual member states only committed to accepting 32,000, with the remainder to be decided later in the year.

On Wednesday, the plan received another blow, when Slovakia announced that it would accept 200 migrants for resettlement, but only if they are all Christians. According to the plan, Slovakia will ask each migrant to name his religion upon arrival, and Muslims would be turned away.

A government spokesman explained that there are now so few Muslims in Slovakia that any new additions would not even want to remain there, and would transit through the country to Germany, where there are already large numbers of Muslims:

We want to really help Europe with this migration wave but… we are only a transit country and the people don’t want to stay in Slovakia.

We could take 800 Muslims but we don’t have any mosques in Slovakia so how can Muslims be integrated if they are not going to like it here?

One EU official said that turning away Muslims would be “discriminatory and of dubious legality.” The Slovakian government statement is provoking outrage, as it challenges the European Union’s multiculturalism ideal. Europa and BBC and Daily Sabah (Turkey)

China’s yuan devaluation causes currency chaos in Asia

The euro currency has devalued 20% against the dollar this year, but that devaluation is not causing as much worldwide concern as China’s devaluation of the yuan currency by 4.4% against the dollar. ( “12-Aug-15 World View — China’s yuan devaluation a humiliating setback for ‘China dream'”)

The reason why China’s devaluation is so disruptive is because it affects the balance of trade throughout Asia. If China’s yuan currency is devalued 4.4%, then a businessman in any other country purchasing goods from China will have to pay roughly 4.4% more, and if he sells goods to China, he will receive roughly 4.4% less money (in his own country’s currency). That means that his prices are a lot less competitive, and China’s are a lot more competitive.

On Wednesday, two Asian countries, Vietnam and Kazakhstan, devalued their own currencies. Vietnam devalued its dong currency by 1%, and Kazakhstan devalued its tenge currency by 4.5%.

Kazakhstan has been especially hurt by the 50% fall in oil prices in the last year. Kazakhstan depends on oil revenues, and requires an oil price of at least $86 per barrel to balance its budget. Oil prices are now getting close to $40 per barrel.

Oil is not the only commodity whose prices are collapsing. This was highlighted on Wednesday when the Switzerland based global mining giant Glencore Plc announced a disastrous earnings fall of 29%. The collapse was blamed on copper, aluminum and coal prices all at multi-year lows. And the reason that commodities prices have been collapsing is because of a slowdown in the economy of China, the world’s largest importer of commodities. So this brings us back full circle to China’s devaluation, and a possible vicious cycle.

As one analyst on BBC pointed out, mining companies like Glencore and Rio Tinto are part of the manufacturing infrastructure that keeps the world running, and produces things like cars and trains. If Facebook disappeared tomorrow, then nothing much would happen. But if Glencore or Rio Tinto disappeared, then the effects on business could be, in the words of the analyst, “apocalyptic.” Bloomberg and Reuters and Bloomberg

KEYS: Generational Dynamics, Slovakia, European Commission, China, yuan, Vietnam, dong, Kazakhstan, tenge, oil, copper, aluminum, coal, Glencore Plc, Rio Tinto
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