China : Stronger yuan affects textile exports

If value of the yuan goes up one percent, Chinese textile exporters lose profits worth nearly US $1 billion. Beijing does not allow the yuan to get appreciated rapidly as this would adversely affect the margin-thin textile industry.

Profit of local textile enterprises drops CNY7.2 billion (US $930 million) per one percent rise in yuan against the dollar, according to China National Textile and Apparel Council (CNTAC) sources.

Textile sector’s performance will be lowered again this year by trade disputes harming export environment and decrease in profit due to strengthening of the yuan. Sector provides employment to nearly 20 million people.

Yuan was trading at 7.743 against the dollar yesterday. Beijing revalued it by 2.1 percent in July 2005 and from then till today it has strengthened 4.7 percent. By 2007 end, this currency is expected to surge four percent further against the dollar.

But strengthening of the yuan cannot stop Chinese textile firms from remaining competitive, as they enjoy advantages of skilled workforce and good logistics.