Weak euro may hurt Chinese exports: Ministry of Commerce

10:26, May 18, 2010      

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As Europe remains mired in a debt crisis and the euro weakens, there may be an impact on China's exports, an official from the Ministry of Commerce (MOFCOM) said Monday.

The sovereign debt crisis has not only hit Greece, but has had a negative influence on the overall economic situation in Europe, and this will influence China's exports as a whole, Yao Jian, spokesman for MOFCOM, said at a news conference in Beijing.

The European Union (EU) is China's largest trading partner. The bilateral trade between China and EU rose 34.6 percent over last year to $137.77 billion, accounting for 16 percent of China's total trade, according to the General Administration of Customs (GAC).

While stating his belief that rescue loans worth 750 billion euros ($924.79 billion) offered by the EU and International Monetary Fund will revive the eurozone economy, Yao noted that due to the crisis, financial markets are seeing frequent fluctuations, dealing a blow to market confidence and delaying the global economic recovery. This means continued sluggish demand.

The debt crisis also affects the stability of the euro, which has dropped heavily against the yuan.

The euro plunged to as low as $1.2234 Monday in Tokyo morning trade, the lowest since April 2006. The yuan, that remains pegged to the dollar, Monday reached a high of 8.3666 against the euro, hitting a new seven-year high. The yuan has appreciated more than 14 percent against the euro this year.

The weakening euro is dampening investors' confidence in the eurozone and adds more uncertainty to Chinese exports to the EU, said Yan Jin, an economist with Standard Chartered Bank (China).

Trade surplus would substantially shrink this year, compared to the past two years, and international balance of payments will improve, Yan reiterated.

Many economists estimated the trade surplus for the whole year to be around $100 billion, compared to $196.07 billion in 2009 and $295.46 billion in 2008.

The yuan exchange rate policy won't change any time soon given the current economic situation, Yan said.

"The government is expected to send a clear message on currency policy change before the G20," she added. The G20 is to meet Canada in June.

Source: Global Times


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