China’s weaker currency to strain Kenya’s markets


The world’s second largest economy China weakened its currency – the yuan by a further 1.1 per cent on Thursday, a move that has rattled financial markets globally.

The devaluing of its currency is believed to have massive effects on emerging markets that largely depend on China for imports.

(READ MORE: South Africa’s rand dragged lower after china devalues currency)


“The [devaluation of the yuan] is going to affect our local industries because we have been having raw materials imports from China,” Merceline Gatebi, research analyst at Genghis Capital told CNBC Africa.

China is Kenya’s largest trading partner, the country’s exports into Kenya rose to 93.6 billion shillings ($919 million) in 2015 from 63.6 billion shillings in the same comparable period in 2014.

Gatebi warns that a weaker yuan might see increased inflow of cheap imports from China.

“With the devaluation of the yuan, China will be offering cheaper imports into Kenya at the expense of what is being produced locally,” added Gatebi.

“The government might have to put additional levies on imports so as to protect domestic industry from Chinese competitors and discourage consumers from importing commodities that are locally produced.”

Gatebi said Kenyan government should make efforts to curb improved imports from China.

Some of the major imports from China into Kenya include textiles, medicines, machinery, automobiles, electronics and tuk tuks.

Gatebi warns that the biggest worry in the immediate future was what was likely to happen in the global economy as a whole and not just Kenya.