China’s currency devaluation not a problem, says GM image

The recent devaluation of the Chinese yuan has increased the concerns about the world’s second biggest economy and largest auto market – both losing steam after years of booming growth.

General Motors, for example, was impacted by the recent move by the Chinese government – with its shares dropping 3.5 percent – though the largest US automaker and the third biggest in the world also said the currency move would not impact the company’s profit. That’s because the cars sold in China are all made there. The recent currency devaluation has lifted already high concerns that the world’s second biggest economy would par its growth even faster than predicted. And it’s also increasing the political tensions with the US and Europe as the weaker local currency will make American and European exports less valuable in China. “General Motors’ primary approach to managing foreign exchange risk has been to employ a natural hedge by building vehicles for sale in each of our major markets,” commented the company. “In China, we believe that this approach, along with a well-established local supply chain, mitigates a majority of the risk associated with the devaluation of the yuan.”

The company meanwhile proceeds with its expansion plans in the region – just last month it announced it was ready to invest 45 billion during the next ten years to research and develop a new family of Chevrolet models particularly directed towards emerging markets such as China, India, Brazil and Mexico. The new cars and their engines would be jointly developed alongside their Chinese partner Shanghai Automobile Industry Corp. (SAIC).