China Watch Blog has learnt that Zhou Xiaonan is increasingly stressed, counting the shrinking profits of his company’s exports as the Chinese currency, the Renminbi (RMB) of yuan, rises.
“The profit loss was 5 US cents per garment at first, then it widened to 10 cents,” said Zhou, deputy general manager of Huamei Thread Company Limited, a Sino-US joint venture based in Ningbo city, East China’s Zhejiang province.
“This is the toughest year for me since I began in the export business a long time ago, even tougher than last year when the world economy was at its bottom during the global financial crisis,” Zhou said.
After racking his brains to deal with rising labor and raw materials costs, Zhou has a new challenge — the rising yuan.
The Chinese currency has strengthened by about 2 percent against the US dollar since the People’s Bank of China (PBOC)’s pledge on June 19 to increase exchange rate flexibility.
Zhou said prior to the yuan’s appreciation, his company had raised its export prices several times this year to pay for the rising costs, with some products’ prices set 20 percent higher than a year ago.
“It is very difficult for us to take new orders because our foreign buyers are unlikely to accept more price hikes because of the exchange rate,” he said.
Like other Chinese exporters, Zhou fears the yuan’s appreciation will incur losses in foreign exchange settlements with foreign buyers.
A Xinhua survey in the provinces of Guangdong, Zhejiang, Jiangsu and Shandong, China’s leading exporting areas, in September found that a sharp increase in the yuan’s value could send many Chinese exporters to the wall.
Liang Yaowen, director of the Foreign Trade and Economic Cooperation Department of the Guangdong Provincial government, told Xinhua China’s exporters were still far from recovering from the global economic downturn.