“U.S. companies that rely heavily on sales to China, including Apple and KFC’s parent company Yum Brands, could soon feel the pain of China’s move to lower the value of its currency,” Kaja Whitehouse reports for USA Today. “China’s central bank Monday devalued the nation’s tightly controlled currency, known as the Renminbi (RMB) or the Yuan, in response to the country’s economic slowdown.”
“The People’s Bank of China called the 1.9% cut a one-time adjustment,” Whitehouse reports. “But the surprise move has pushed stocks down amid concerns that it will hurt U.S. companies, like Apple, that have been increasingly peddling their products to the world’s most populous nation.”
“Under CEO Tim Cook, China has become Apple’s largest revenue source after its Americas region, which includes the U.S. In the latest three-month period, ended in June, the iPhone maker said China made up $13.2 billion of its overall revenues of $49.6 billion,” Whitehouse reports. “For some companies, the negative impact on sales may be offset by lower production costs, said Adolfo Laurenti, chief international economist for Mesirow Financial in Chicago. Apple, for example, assembles many of its products in China and therefore could benefit that way from the cheaper Yuan. Laurenti also thinks companies with strong enough brands — like Apple — may not be dinged as badly as less popular products because wealthy Chinese consumers may be willing to shell out more to have those name brands.”
Read more in the full article here.
MacDailyNews Take: Perhaps, especially with the strength of Apple’s brand in China, the gain on production costs will outweigh whatever pain Apple might feel in China sales? Apple in China, as in most places on the planet, is an aspirational brand. If you really want an iPhone and the status that comes with it, a fake iPhone from Xiaomi simply isn’t going to cut it.