Hong Kong, China- December 2, 2016: According to a survey conducted by JP Morgan, of the companies in Asia Pacific with a collective market capital of more than USD (The United States Dollar) 3.2 trillion, China's currency reforms with respect to its exchange rate regime has brought about great dividends for their businesses over the past 12 months. Furthermore, after the People's Bank of China's one-off adjustment to the CNY (Chinese yuan) rate of reference since August, 2015, there has been- a 7.4% depreciation of CNY against the USD, 11% depreciation of CFETS (China Foreign Exchange Trade System) index, and USD 460 billion depreciation in China's FX (Foreign Exchange) reserves.
Head of JP Morgan's Asia Pacific Global Corporate Banking, Mr. Muhammad Aurangzeb said, "We have observed a stage of volatility after the radical decision last year but we reckon the distress is over. Though FX risk is a crucial factor for cash managers, we have confidence in China and the currency's gradual internalization. The incorporation of the CNY in the SDR (Special Drawing Rights) basket of the IMF (International Monetary Fund) since October is a testament enough of the global importance of the currency which continues to grow."
The survey was organized at the recently held JP Morgan's Annual Asia Pacific Treasurers Forum in Shanghai. Issues of growth opportunities and cash management that persists in the current business scenario were discussed by senior financial professionals from over 100 regional and global corporates. JP Morgan's forecast for the end of 2016 is 6.85 for USD/CNY though a major percentage of the survey's respondents voted for a depreciation of 6.8 to 7.0 CNY exchange rate against the USD. For corporate treasures, the most distressing macro- economic issue that continues to worry them is China's economic slowdown which is succeeded by the direction taken by US rates of interest and slowdown of emerging markets.
China saw a 6.9% rate of growth in 2015 which was its slowest in the last 25 years. It's very saddening for the second largest economy of the world which is a crucial driver of international growth. Mr. Aurangzeb said, "It's not surprising that China's slowdown has materialized into a top matter of concern for the second straight year for the corporate treasurers who attended our forums because of the prominent role played by the Chinese economy. The transition of the Chinese economy from a growth model led by exports and investment to services and the consumption-driven market is the fundamental reason of China's slowdown. We believe it will bring about a positive development in the long run as a market driven by the latter is eventually more sustainable.
21% of the corporate treasurers also pointed cyber security being a crucial focus area for their firms with respect to technology, in the survey. "With an increase in cyber crimes that can seriously impact companies and their businesses, investments need to be prioritized by the corporate treasurers in order to mitigate this considerable risk. JP Morgan being a leader of the technology of cash management and digitized treasury solutions, considers cyber security to be at the forefront while catering to the needs of our clients. We will keep investing in this space, "said Mr. Aurangzeb.