Yuan rise would be disastrous: China export body

Yuan rise would be disastrous: China export body
Mar 20, 2010 14:16
WUYUETIAN Points: Join Date: Jun 9, 2009 Status: offline	Source: Reuter.com (Reuters) - A rise in the yuan would be a disaster for labor-intensive Chinese exporters, a semi-official trade group said on Thursday, as frictions grow with the U.S. and other Western powers over Beijing's stable currency policy. The China Council for the Promotion of International Trade was checking with more than 1,000 exporters in 12 industries on whether they could cope with a stronger exchange rate, Zhang Wei, vice-chairman of the association, said. Exporters in labor-intensive sectors such as garments and furniture worked on margins as small as 3 percent, he said. "If the yuan rises, these companies will face the immediate risk of going bust as their profit margin is already very narrow," Zhang told a news conference. "So for these companies, the consequences would be disastrous." China is under growing pressure from Washington to let the yuan appreciate. U.S. lawmakers are threatening to slap duties on Chinese goods unless Beijing abandons its effective peg of 6.83 yuan per dollar instituted in mid-2008 to help its exporters ride out the global financial crisis. While external pressure on China to push up the yuan is intense, domestic pressure to hold the currency down is even greater, said Zhang, whose members include the country's biggest exporters. China's shipbuilders alone had $150 billion of orders on hand, so a stronger yuan would result in immediate losses, he said. Only a minority of Chinese firms hedge exchange rate risk. Exporters of telecommunications equipment and mechanical products would also be particularly vulnerable, he said.

Mar 20, 2010 14:16

WUYUETIAN
Points:
Join Date: Jun 9, 2009
Status: offline

Source: Reuter.com

(Reuters) - A rise in the yuan would be a disaster for labor-intensive Chinese exporters, a semi-official trade group said on Thursday, as frictions grow with the U.S. and other Western powers over Beijing's stable currency policy.

The China Council for the Promotion of International Trade was checking with more than 1,000 exporters in 12 industries on whether they could cope with a stronger exchange rate, Zhang Wei, vice-chairman of the association, said.

Exporters in labor-intensive sectors such as garments and furniture worked on margins as small as 3 percent, he said.

"If the yuan rises, these companies will face the immediate risk of going bust as their profit margin is already very narrow," Zhang told a news conference. "So for these companies, the consequences would be disastrous."

China is under growing pressure from Washington to let the yuan appreciate. U.S. lawmakers are threatening to slap duties on Chinese goods unless Beijing abandons its effective peg of 6.83 yuan per dollar instituted in mid-2008 to help its exporters ride out the global financial crisis.

While external pressure on China to push up the yuan is intense, domestic pressure to hold the currency down is even greater, said Zhang, whose members include the country's biggest exporters.

China's shipbuilders alone had $150 billion of orders on hand, so a stronger yuan would result in immediate losses, he said. Only a minority of Chinese firms hedge exchange rate risk.

Exporters of telecommunications equipment and mechanical products would also be particularly vulnerable, he said.

Mar 20, 2010 14:20

WUYUETIAN
Points:
Join Date: Jun 9, 2009
Status: Offline

Several branches of government, including the ministries of commerce and industry, conducted similar currency stress tests last month.

A government source familiar with one of the missions to China's coastal exporting hubs said it came back unconvinced that the advantages of a stronger yuan would outweigh the drawbacks because of the razor-thin margins that Zhang mentioned.

"But having said that, we found that these companies are quite flexible in adapting to new market conditions," he said.

Because they can make a steady profit on their current margins, thanks to high volumes, they have little incentive to move up the value chain, the source added.

...........................

An employee counts U.S. dollar banknotes at a branch of Huaxia Bank in Shenyang, Liaoning province March 18, 2010. A rise in the yuan would be a disaster for labour-intensive Chinese exporters, a semi-official trade group said on Thursday, as frictions grow with the U.S. and other Western powers over Beijing's stable currency policy. The China Council for the Promotion of International Trade was checking with more than 1,000 exporters in 12 industries on whether they could cope with a stronger exchange rate, Zhang Wei, vice-chairman of the association, said.

Credit: Reuters/Sheng Li

Mar 20, 2010 14:22

WUYUETIAN
Points:
Join Date: Jun 9, 2009
Status: Offline

"So yuan appreciation would be a nice catalyst to force these firms to change for the better, which is also what the government wants to see," he said.

"It's true that jobs are a major concern. But we're also seeing labor shortages in many places. So I think it should be manageable."

MORE TIME, PLEASE

The source familiar with the stress tests, speaking in a personal capacity, said arm-twisting by U.S. lawmakers was counter-productive.

"The last thing China will do is be seen bowing to foreign pressure, even if it's the right thing to do. The Americans should keep quiet and not lecture the Chinese. Once it's left alone, China is quite likely to move on the yuan," he said.

Chinese Premier Wen Jiabao denied on Sunday that the yuan is undervalued and criticized Washington for politicizing the issue.

The Ministry of Finance might also send research teams to Guangdong, Zhejiang and Shanghai later this month to test companies' ability to withstand an appreciation of the yuan, the 21st Century Business Herald reported on Thursday.

Zhang said that Chinese exporters, anticipating a stronger exchange rate, had been improving their product ranges and switching their attention from the United States and Europe to Africa, Latin American and the Middle East.

That had helped many exporters to cope with the cumulative 21 percent rise in the yuan against the dollar between July 2005 and July 2008.

But firms needed more time to adjust further, Zhang said.

Mar 20, 2010 21:47	#3
COOLSPRINGS Points: Join Date: May 19, 2008 Status: Offline	Who is the government source Zhang. He is talking nonsence. American lawmakers and money players rob money of their own folks and even lose their own country for the sake of their own benefits through manipulating economic tools. American lawmakers and money players are playing Zero-Sum game that doesn't bring any physical wealth to America. U.S. through conductiong currency manipulation gave JP a deadly hit and mainly caused JP to suffer economic downturn or recession for almost 20 years. It's high time that U.S. seek root issue of their own insead of blame others.
COOLSPRINGS Points: Join Date: May 19, 2008 Status: Offline	Last edited by COOLSPRINGS: Mar 20, 2010 21:55

Mar 25, 2010 19:57	#4
BOBERT Points: Join Date: Jan 1, 2009 Status: Offline	The simple truth is that the United States holds all the aces in this game. That's the benefit of being the biggest economy in the world. If China doesn't devalue the yuan, America will instigate a trade war and force her to. America will impose crushing tarrifs on all Chinese imports which will force Americans to buy elsewhere. Europe will do the same because they agree with America that the yuan is artificially undervalued. They believe that's partly the cause of their high rate of unemployment and balance of trade problems. If China maintains the yuans current value to placate her own exporters then soon there will be no customers left to export to. There are many other developing countries delighted to sell to China's customers cheaper than China could with tarrifs imposed. Without exports, China's economy will crumble. Currently the balance of trade is hugely weighted in China's favor. China risks losing the majority of her export customers and severley curtailing her economic growth. America and Europe risk losing.........not a dam thing! If you were America....what would you do? The answer is patently obvious.
BOBERT Points: Join Date: Jan 1, 2009 Status: Offline	Last edited by BOBERT: Mar 25, 2010 20:08

Mar 25, 2010 20:07	#5
COOLSPRINGS Points: Join Date: May 19, 2008 Status: Offline	Are you trying to say American's debt can be reduced by 1/3 through forcing pulling up the value of RMB by 33.3%.

Mar 26, 2010 14:55	#6
BOBERT Points: Join Date: Jan 1, 2009 Status: Offline	Quote: Originally Posted by COOLSPRINGS Are you trying to say American's debt can be reduced by 1/3 through forcing pulling up the value of RMB by 33.3%. Is this question directed at me COOLSPRINGS?

Mar 27, 2010 20:38	#7
COOLSPRINGS Points: Join Date: May 19, 2008 Status: Offline	Yes, it is. How about anti-tariff through reimbursement of exporters and advancing low-rate loans to exporters. It's an integreted economy with multi-poles economic powers. U.S is not and will not be the only one who counts.

Mar 28, 2010 14:24

BOBERT
Points:
Join Date: Jan 1, 2009
Status: Offline

Quote:

Originally Posted by COOLSPRINGS

Yes, it is. How about anti-tariff through reimbursement of exporters and advancing low-rate loans to exporters. It's an integreted economy with multi-poles economic powers. U.S is not and will not be the only one who counts.

COOLSPRINGS; I have absolutely no idea what you are trying to say. I can only reiterate my previous remarks and add that this is not a matter of China taking a position against the U.S. This is China taking a stance against the entire world! There can be only one loser in such a trade war.

Mar 28, 2010 20:54

COOLSPRINGS
Points:
Join Date: May 19, 2008
Status: Offline

Pollution and low value added exports is not what we like. Seeking transforming economic fundamentals, I guess, is already as a priority in development agenda in China. China has huge capacity of domestic consumption. Hence the key issue arising from appreciation of RMB is not in trade sector rather in upgrading of economic fundamental. America is always a pioneer tide player in terms of taking risks itself and at the same time pushing others to be involved in its game. The globalization initiated by U.S. has brought huge benefits to China. Hope the upcoming challenge would direct Chinese to re-see the most glorious chapter in our history back to Tang Dynasty.

Here is an good article addressing the RMB appreciation.

Hope BOBERT would take time to read it.

Mar 28, 2010 20:55

#10

COOLSPRINGS
Points:
Join Date: May 19, 2008
Status: Offline

How to look at Sino-US trade and RMB appreciation?
By Xuefei Chen, People’s Daily Online correspondent in Stockholm.

The imbalance of Sino-US trade and the value of RMB have been two issues which aroused great attention from both inside and outside China. How to look at these issues?

Professor He Maochun said people should not worry too much about the trade imbalance between China and the US in an interview with People’s Daily Online recently in Stockholm. He is director of Center for Economic Diplomacy Studies at Qinghua University and was here to have participated in the sixth China Forum which focused on several key issues on China and its relations with the US and the EU. Professor He has committed himself to the trade issues since China joined the World Trade Organization.

“Sino-US trade imbalance has been existing for a long time, it is not the most serious time now. It is actually a natural consequence if you consider the economic structure of China and the US, thus, people should not worry that too much, ” said Professor He.

Page 1 of 2 < Previous Next > Page:

Post a Reply to: Yuan rise would be disastrous: China export body