Dangers of volatile rates, rising prices
By Wang Yanlin |
October 28, 2010, Thursday
|
Print Edition
Print Edition
VOLATILE exchange rates and rising prices for major commodities may cause serious problems for Chinese exporters, Commerce Minister Chen Deming said at a trade fair in Guangzhou.
"Exporters have already been under pressure when China's labor costs are increasing rapidly this year," Chen said. "They also are mentally prepared for a stronger yuan. But so fast an appreciation is what they have not expected... and can't afford."
He added prices of major commodities such as gold and copper are surging relentlessly in recent months, triggering serious concerns among export-oriented manufacturers in China over the rising costs.
Chen made the remarks at China Import and Export Fair, also known as the Canton Fair, in Guangzhou. The fair, which started on October 15 and will end next Thursday, is the largest of its kind in the country and is deemed a key barometer of the outlook for Chinese trade.
Dealers at the fair have reported buyers are reluctant to commit to deals on uncertainties generated by the volatile exchange rate.
The yuan has strengthened by nearly 3 percent against the US dollar since the People's Bank of China, the central bank, pledged on June 19 to increase exchange rate flexibility.
Despite the yuan's appreciation, the United States continued to exert pressure on the yuan to rise even faster. The US House of Representatives approved a bill on September 29 which allowed the US Commerce Department to impose tariffs on imports from countries with "fundamentally undervalued" currencies, with China being the main target.
China's exports, the hardest-hit sector by the global financial crisis, have just returned to pre-crisis level. Exports rose 25.1 percent from a year earlier to US$144.9 billion in September, down from the increase of 34.4 percent in August.
A Xinhua news agency survey last month found that the profit margin for labor-intensive export industries such as textiles, garments, footwear, toys and auto parts has declined below 5 percent this year, which leaves little room for these companies to absorb rising costs.
"Exporters have already been under pressure when China's labor costs are increasing rapidly this year," Chen said. "They also are mentally prepared for a stronger yuan. But so fast an appreciation is what they have not expected... and can't afford."
He added prices of major commodities such as gold and copper are surging relentlessly in recent months, triggering serious concerns among export-oriented manufacturers in China over the rising costs.
Chen made the remarks at China Import and Export Fair, also known as the Canton Fair, in Guangzhou. The fair, which started on October 15 and will end next Thursday, is the largest of its kind in the country and is deemed a key barometer of the outlook for Chinese trade.
Dealers at the fair have reported buyers are reluctant to commit to deals on uncertainties generated by the volatile exchange rate.
The yuan has strengthened by nearly 3 percent against the US dollar since the People's Bank of China, the central bank, pledged on June 19 to increase exchange rate flexibility.
Despite the yuan's appreciation, the United States continued to exert pressure on the yuan to rise even faster. The US House of Representatives approved a bill on September 29 which allowed the US Commerce Department to impose tariffs on imports from countries with "fundamentally undervalued" currencies, with China being the main target.
China's exports, the hardest-hit sector by the global financial crisis, have just returned to pre-crisis level. Exports rose 25.1 percent from a year earlier to US$144.9 billion in September, down from the increase of 34.4 percent in August.
A Xinhua news agency survey last month found that the profit margin for labor-intensive export industries such as textiles, garments, footwear, toys and auto parts has declined below 5 percent this year, which leaves little room for these companies to absorb rising costs.
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