Half of export enterprises can bear 3% yuan appreciation

15:27, November 22, 2010      

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Around half of China's export-oriented companies can bear a 3 percent yuan hike, but their profits will shrink significantly, a business group said after a survey was conducted recently.

The survey, conducted by the China Chamber of Commerce for Import and Export of Light Industrial Products and Arts-Crafts (CCCLA), involved 45 light industry export enterprises.

Among them, 37 respondents believe they are able to bear more than 1 percent of yuan appreciation in 2011, accounting for 82 percent. Thirteen respondent enterprises believe they can bear 1 percent of yuan appreciation; 14 respondent enterprises believe they can bear 3 percent yuan appreciation; and 10 respondent enterprises believe they can bear more than 5 percent yuan appreciation. In other words, more than 50 percent of respondent enterprises believe they can bear more than 3 percent yuan appreciation.
Data shows that the appreciation rate of the yuan against the U.S. dollar has reached about 2 percent since the yuan exchange rate reform restarted on June 19. Thirty-five respondent enterprises accounting for 78 percent of the total 45 respondent enterprises said that their profit margins have declined.

Experts note that among a variety of export industries, labor-intensive Industries are most "sensitive" to exchange rate fluctuations because of low profit margins. Despite this fact, China's light industry has maintained strong export momentum since the start of 2010. According to the data from CCCLA, China's light industrial product and handicraft exports in the first nine months of 2010 totaled 157 billion U.S. dollars, a surge of 32 percent from the same period of 2009.

Mei Xinyu, a researcher with the Chinese Academy of International Trade and Economic Cooperation under the Ministry of Commerce, believes that China's manufacturing industry is undoubtedly suffering from the impact of the "money flood." However, lots of overseas competitors of China's labor-intensive export enterprises as well as some emerging countries are also facing the same currency appreciation issue.

"With China's increasingly higher overall economic status, the trend toward yuan appreciation is unstoppable in the long term," Mei said.

He believes that to ease the impact of exchange rate issue, Chinese export enterprises should still follow the fundamental strategies of building up non-price competitiveness and seize the opportunity to increase the added value of export products.

By People's Daily Online


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