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Weaker Yuan Strengthens Chinese Tech Firms

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Published on : Aug 31, 2015

China’s efforts to revive its slowing economy have strengthened the domestic technology sector. The government’s decision to devalue yuan in August has made the competition tough for the U.S.-based technology firms as their products have become more expensive than those manufactured by the local technology companies. Increasing demand for local technology product and services has restrained the growth of many U.S. firms in the second largest market of the world. Also, devaluing Chinese currency has made locally-manufactured goods cheaper abroad. This has been in sync with the government’s policies to promote foreign sales by local technology vendors.

Analysts have pointed out that with the government focussing on exports to boost the economy, Chinese technology firms will become aggressive in the international market. Though China was earlier known as the low-cost manufacturing hub with large appetite for consumption that made it the prime target for the U.S. companies, domestic companies have started developing home-grown designs for computers, mobile devices, and other products and are making their presence felt in the global markets. 

China is the world’s largest market for smartphones. Domestic companies Xiaomi Corp. and Huawei Technologies Co. have introduced attractively designed and competitively priced products to push Apple Inc. at third position in terms of sales across the globe. Slowing Chinese economy has made the smartphone manufacturers to look abroad for sales that has led Xiaomi to sell its products in India and Brazil. Chinese customers are increasingly preferring local companies to buy server systems, networking devices, and personal computers, making it difficult for the U.S. companies such as Cisco Systems Inc., and Hewlett-Packard Co. However, the declining yuan has helped some of the U.S. companies to procure goods bought or manufactured in China at a lower price, thereby increasing their profit margins. 

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