Cheaper yuan attracts Canton Fair buyers, but exporters won't count on it | South China Morning Post
  • Sat
  • Mar 28, 2015
  • Updated: 12:40pm

Canton Fair

China Import and Export Fair, also known as the Canton Fair, is held biannually in Guangzhou every spring and autumn. The exhibition, which has been held every year since 1957, is the largest of its kind in China in terms of scale, variety, distribution of overseas buyers and business turnover.   

BusinessChina Business
TRADE

Cheaper yuan attracts Canton Fair buyers, but exporters won't count on it

Exporters keen to take advantage of currency's depreciation but won't count on it lasting, vowing to pass any increases on to their customers

PUBLISHED : Friday, 18 April, 2014, 9:31am
UPDATED : Saturday, 19 April, 2014, 12:40am

Olu Adeleke sees the coming weeks as a golden opportunity to shop in China, now that the yuan's protracted appreciation seems to have reversed in the past two months.

Adeleke, a United States-based importer of solar equipment and environmentally friendly lighting products for Nigeria, planned to "buy many products" on his first visit to the Canton Fair in Guangzhou, the twice-yearly mega trade show that began on Tuesday.

The volatility of the yuan increased last month when the People's Bank of China allowed the currency to trade up to 2 per cent - from 1 per cent previously - above or below a reference rate against the US dollar that the central bank sets each day.

We assume the yuan will return to the appreciation track … this year
TIMO XU, ZHONGSHAN LIGHTING BIRD

The yuan has sunk 2.7 per cent since the beginning of the year. It traded at 6.2209 per US dollar yesterday.

"[A lower yuan] will definitely attract more people to source goods in China if it keeps [falling]," said Adeleke, who was evaluating deals on the exhibition floor, where there were about 24,000 exhibitors.

He said he would raise his prices if the yuan appreciates again.

A depreciating yuan means good news for mainland exporters, but some are sceptical the trend will last.

Zhongshan Lighting Bird, a Pearl River Delta maker of wooden lamps exhibiting its products at the fair, expects the currency to gain about 5 per cent over the rest of the year.

"We assume the yuan will return to the appreciation track later this year," said Timo Xu, the company's marketing chief. "We won't swallow a more expensive yuan and will pass the exchange rate difference on to customers."

To mitigate currency risks, the manufacturer is increasing automation at its production base in Zhongshan, minimising its operating costs and rolling out higher-priced products, he said.

Analysts broadly do not expect any sharp depreciation of the mainland's currency, considering Beijing's ambitions to internationalise the yuan as well as warnings from the United States over the currency's recent weakness.

"The yuan deprecation will be short-lived if there is no fundamental change to the one-way capital inflows, especially when China still has a very sizeable current account surplus," ANZ chief economist Liu Ligang said. The current account surplus stood at US$50 billion at the end of last year.

Mizuho Bank said it expects the yuan to depreciate in the short term but return to its usual appreciation trajectory in the second half of this year and reach as high as 6.05 to the US dollar.

On Tuesday, Washington urged Beijing to reduce its intervention in the currency and let markets play a bigger role in setting the value of the yuan. A semi-annual report by the Treasury Department to Congress criticised the PBOC for intervening in the yuan's value by allowing it to weaken against the US dollar.

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