Citing research by Guotai Jun'an Securities Research Institute, the
commission stressed that a 1-per-cent appreciation in the yuan would lead to a
loss of 2 per cent in profit margins. In sectors heavily dependent on exports
such as cotton, wool and fabric for home use, the decline could be as much as 6
per cent, it said.
As exporters earn only an average of 30 US cents from the export of a shirt,
the appreciation of the yuan underlines the need for textile manufacturers to
sustain their competitiveness through technical innovation and intellectual
property rights protection rather than through price cuts, said Li Lingmin,
vice-president of the China National Textiles Imports and Exports Corporation.
The growth rate of China's textile exports has slowed but they still rank the
highest in the world.
From January to July, exports reached about US$27 billion, up 18.7 per cent
on the previous year. The growth rate is 4.3 percentage points lower than the
previous year and 3.1 percentage points lower than in January.
Economists said the trend of yuan appreciation is likely to be maintained,
given the strong growth of the Chinese economy, rapid increase of foreign
exchange reserves and trade surplus, and in particular, a strong expectation of
further appreciation of the renminbi.
But Wang Xiaoguang, a senior researcher at the Academy of Macro-economic
Research affiliated to the National Development and Reform Commission, said
further appreciation should be avoided because it will not help set right the
imbalanced structure of the economy or curb overheated investment.
A slow appreciation also does not work because it would strengthen the
expectation of further appreciation of the currency and nurture speculation by
domestic or international capital, Wang wrote in an article published in
Shanghai Securities News yesterday.
He suggested China make it clear that maintaining a stable yuan exchange rate
in the medium and long term is a premise for stable economic growth in the long
run.
The authorities should promise to increase the flexibility of the foreign
exchange rate regime and stress that the yuan will not move in only one
direction, he said.
Xinhua - China Daily
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