While the unexpected devaluations of the Chinese currency last week was a shock to the system for many foreign exchange traders, observers say it is unlikely that it will significantly affect Canadian exports and overall economic performance.

China’s central bank surprised markets Tuesday by moving the renminbi lower by 1.9 per cent against the U.S. dollar. It was the biggest drop in the currency since 2005, when the Chinese currency was pegged to the American one. Drops were again recorded on Wednesday, falling to US$0.155 before rebounding and holding steady at $0.156 as of last Friday.

Some international observers were concerned the rate may affect import and export patterns. But while the renminbi’s fall was dramatic (from US$0.165 in January 2014), the Chinese currency has actually gained value against most other major currencies during that same time, even with last week’s drop taken into account.

For example, against the Canadian dollar, the renminbi has strengthened from $0.184 in January 2014 to $0.212 just before the drop, a 15.2 per cent increase. With the drops last week, it is now around $0.204, at about the same level it was in January.

Against other currencies, the renminbi is still largely a net-gainer for the last two years. It was at 0.122 euro in early 2014, and last week’s drop brought the figure to 0.140 euro from a high of 0.152 euro earlier this year. Gains against the yen, which has been artificially devalued as Tokyo battles deflation, were even more pronounced.

Given that the Chinese currency only dropped against the U.S. dollar, and that was described by the Chinese central bank as a one-time two per cent drop, no immediate or mid-range effect on trade is likely.

“The effect on Canadian exporters is negligible at this point,” said Andreas Schotter, professor of global strategy at the Ivey Business School in London, Ont. “If at all, it slightly benefits importers of Chinese products.”

Some producers said they could be aided by Chinese producers having to pay more to get B.C. lumber, given value-added goods from China is actually a major competitor for local businesses.

For B.C.’s independent wood producers, who compete with Chinese-made added-value wood products made with raw lumber from B.C., the slightly higher cost of B.C. lumber for Chinese companies is welcome, said Russ Cameron, president of B.C.’s Independent Wood Processors Association, how said the rising US Dollar is a much bigger concern.

“The Canadian government taxes our value added wood products entering the USA, if we employ British Columbians to manufacture them from B.C. grown wood in BC,” said Cameron in a written response. “But if we send the raw logs or rough lumber to China or the USA and they produce the same products, there is no tax … From our point of view, the higher the cost to the Chinese for our raw materials, the better.”

Chinese authorities have said the renminbi devaluation is a one-time occurrence and allows the market to play a bigger role in the currency’s value. Beijing is seeking to have the renminbi included in the International Monetary Fund’s group of SDR reserve currencies, which includes the U.S. dollar, the British sterling and the Japanese yen. And given China’s policies almost always having a focus of maintaining stability domestically, further jolts seem unlikely.

As such, the devaluation is seen as a singular step toward further renminbi globalization by observers, even if there may be short-term concerns due to the unexpected nature of the currency drop. And that may prove to be the biggest short-term impact — not on exports, but on investors psyche as currency and market upheavals create a general sense of unease that financial markets tend to dislike.
“While I believe the two-per-cent adjustment is for most firms outside of the financial services industry not that significant, the signal as such will heighten the cautiousness towards the Chinese economy and the global economy at large,” Schotter said, but added a “currency war” where rival markets artificially devalue currencies to gain an edge in trade is unlikely.

“As a matter of fact, nobody wants such a war as it would do more harm than good. The degree of integration of the global economy at the national level and at the firm level is so great that a currency war only has downsides.”

BC’s exports to China totalled $6.3 billion in 2014, with wood pulp, lumber, coal and copper ore being the top traded commodities.