Number Crunching: The Impact of China’s Currency Devaluation
In the grand scheme of things, China’s mid-August currency devaluation spree was a drop in the bucket. Since the Financial Crisis, countries have routinely printed money, kept rates pegged artificially low, and found other ways to get temporary competitive advantages with cheaper currency. While the People’s Bank of China has made some questionable interventions, China’s currency itself has been pegged to the US dollar officially or unofficially since its early history. With the US dollar climbing wildly against most global currencies since mid-2014, the yuan climbed along with it. China’s currency appreciated against all other major Asian currencies, which erased the country’s manufacturing cost advantage and trade surplus. In retrospect, it is almost surprising that they kept the reference rate where it was for this long. The strong reaction from markets and media was more from the angle that even slightest movement made by China can create a ripple effect on fragile global markets. China, for a better lack of an analogy, is a bull in a china shop. Its economy and currency are seen as important bellwethers and when the PBOC makes an announcement, people listen. That’s why in mid-summer, markets got volatile in a hurry. China devalued its currency by 1.9% on August 11 and made some smaller changes since then. The country also announced adjustments to how it would calculate its onshore reference rate moving forward. Today’s infographic looks at the reaction in currency markets in three timeframes after the event: 24 hours, one week, and one month after. Some currencies, like the euro, appreciated against the Chinese Renminbi right away and maintained that momentum. The euro went up 2.06% in the first day, and then continued to appreciate to 5.73% by the end of 30 days. Others swung back and forth wildly: at first the South African rand was up 0.71%, but then it ended as the biggest loser against the yuan at -4.24% over the course of a month. Despite the mixed reaction from different currency markets, the reason China did this was clear. The country wanted to promote convergence in its onshore and offshore rates, and it has also been trying to woo the IMF for some time to be included in the IMF’s basket of reserve currencies called Special Drawing Rights. The latter move is a part of China’s posturing to eventually better internationalize the yuan. As a side benefit of the devaluation, China also gets temporary relief in promoting exports at a cheaper price – though this will only last until the next country takes action in the game of currency war hot potato. Original graphic by: Inovance
on A lagging stock market dented these fortunes against high interest rates, energy shocks, and economic uncertainty. But some of the world’s billionaires have flourished in this environment, posting sky-high revenues in spite of inflationary pressures. With data from Forbes Real-Time Billionaires List, we feature a snapshot of the richest people in the world in 2023.
Luxury Mogul Takes Top Spot
The world’s richest person is France’s Bernard Arnault, the chief executive of LVMH.
With 75 brands, the luxury conglomerate owns Louis Vuitton, Christian Dior, and Tiffany. LVMH traces back to 1985, when Arnault cut his first major deal with the company by acquiring Christian Dior, a firm that was struggling with bankruptcy.
Fast-forward to today, and the company is seeing record profits despite challenging market conditions. Louis Vuitton, for instance, has doubled its sales in four years.
In the table below, we show the world’s 10 richest people with data as of February 27, 2023:
Elon Musk, the second-wealthiest person in the world has a net worth of $191 billion. In October, Musk took over Twitter in a $44 billion dollar deal, which has drawn criticism from investors. Many say it’s a distraction from Musk’s work with Tesla.
While Tesla shares have rebounded—after falling roughly 70% in 2022—Musk’s wealth still sits about 13% lower than in March of last year.
Third on the list is Jeff Bezos, followed by Larry Ellison. The latter of the two, who founded Oracle, owns 98% of the Hawaiian island of Lanai which he bought in 2012 for $300 million.
Fifth on the list is Warren Buffett. In his annual letter to shareholders, he discussed how Berkshire Hathaway reported record operating profits despite economic headwinds. The company outperformed the S&P 500 Index by about 22% in 2022.
How Fortunes Have Changed
Given multiple economic crosscurrents, billionaire wealth has diverged over the last year. Since March 2022, just four of the top 10 richest in the world have seen their wealth increase. Two of these are European magnates, while Carlos Slim Helu runs the largest telecom firm in Latin America. In fact, a decade ago Slim was the richest person on the planet. Overall, as the tech sector saw dismal returns over the year, the top 10 tech billionaires lost almost $500 billion in combined wealth.
Recent Shakeups in Asia
Perhaps the most striking news for the world’s richest centers around Gautam Adani, formerly the richest person in Asia. In January, Hindenburg Research, a short-selling firm, released a report claiming that the Adani Group engaged in stock manipulation and fraud. Specifically, the alleged the firm used offshore accounts to launder money, artificially boost share prices, and hide losses. The Adani Group, which owns India’s largest ports—along with ports in Australia, Sri Lanka, and Israel—lost $100 billion in value in the span of a few weeks. Interestingly, very few Indian mutual funds hold significant shares in Adani Group, signaling a lack of confidence across India’s market, which was also cited in Hindenburg’s report. As a result, Mukesh Ambani has climbed to Asia’s top spot, controlling a $84 billion empire that spans from oil and gas and renewable energy to telecom. His conglomerate, Reliance Industries is the largest company by market cap in India.
