Importers' gain would be exporters' loss

10:10, March 22, 2010      

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Despite continuing debates on the rise of the yuan's value, experts say the appreciation of the yuan would be a double-edged sword for the Chinese economy, benefiting importers and overseas tourism but hurting exporters.

Ministry of Commerce spokesman Yao Jian Friday denied the ministry had initiated stress tests on the yuan's appreciation. He said industry groups are "asking for opinions" on the yuan's appreciation.

"Results of stress tests could provide data as reference for decision makers," said Wan Jifei, chairman of the China Chamber of International Commerce, at a media briefing over the weekend.

"The appreciation of the yuan will benefit Chinese importers but hurt exporters, so enterprises should prepare in accordance with their own situations," he said.

Zhang Yanling, vice-president of the Bank of China, said the overseas tourism and education industries would benefit from a rise in the yuan, as well as some financial institutions, which could then better promote yuan settlement services in cross-border trade.

China's tourism industry saw its first trade deficit since 1982 when it exceeded $2 billion in 2009. The deficit is expected to widen to $5 billion this year, according the China Tourism Academy.

"The appreciation of the yuan would increase foreign tourists' expenses in traveling around China, but its influence would be limited due to the relatively cheap price of tourism products," said Cao Ruzhen, manager of Beijing Zhongguang International Travel Service's branch in Shangdi, Haid-ian District.

Ouyang Kun, China chief representative of the World Luxury Association, said the rise of the yuan would also stimulate the domestic consumption of foreign luxury brands.

But it might not be good for Chinese exporters, especially in labor-intensive industries.

Ren Yuanbin, president of the China National Machinery Industry Association, said the association's members would lose several hundred million yuan in annual profits if the currency rises. "We can save some money from the import section, but lose more from the export section," he said. "It will force us to upgrade technology and develop high-end products."

Wang Shaoqing, vice-chairman of the Shenzhen Association of Arts and Crafts Industry, said the group's members have prepared for the exchange rate risk. "This is not the first time we have experienced the appreciation of the yuan. Most exporters have adjusted their product structures to wash out low value-added offerings, and are able to include the increasing cost in their orders," he said.

However, small exporters in labor-intensive industries such as furniture and toys have little power in price negotiations with foreign buyers, so they would be the biggest victims of the yuan's appreciation, said Deng Yubo, general director of Chinese Affairs at the Europe China Trade Center, a private trade organization based in the Netherlands.

Source: Global Times
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