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Yuan appreciation has hurt exporters' profits

08-18-2011 10:41 BJT

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And it hasn't just been the last week - the RMB has been climbing since the start of the month. Economists and analysts kept a close eye as the yuan broke through the 6.4 resistance level against the greenback, and flirts with the 6.3 line. The currency's quick rise may be good for consumers, but not so for exporters. They lose when the yuan gains.

Wenzhou in Eastern China's Zhejiang Province is famous for its shoe business. Ao Kang Shoes alone exports 30 million pairs to other parts of the world annually. Because the firm's market is mainly in Europe, transactions are done in euros or US dollars. So, as the yuan appreciates, those balances in other currencies are worth less; therefore, the company's profit takes a hit.

Li Haijun, Dept. Manager of Ao Kang Shoes Co. Ltd, said, "We are going to fix the exchange rate, so when the payments are received, they are transferred to RMB at this set rate."

The RMB has risen over 6 percent in one year. And with the US and European economies facing slowing growth, Chinese exporters will have to deal with more uncertainties - including lower orders from their biggest markets.

Chen Zhicheng, Admin. Director of Dept. of Commerce in Zhejiang Province said, "90 percent of businesses can withstand exchange rate fluctuations within 3% - anything larger than this can be difficult to deal with."

Official statistics show that Chinese exporters are facing declining orders. Firms are advised to watch the forex market closely, and hedge their risks through fixing exchange rates.

Editor:Li Wanran |Source: CNTV.CN

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