Ministry of Commerce Vice-Minister Zhong Shan has warned of 'a complex and difficult year' ahead for the mainland's export sector but vowed to help by keeping the yuan stable. In a rare visit to Hong Kong yesterday, Zhong said a stable currency would be good for both the nation and the world, which were still licking their wounds from the global financial crisis. His comments were aimed at allaying exporters' growing fears of a looming appreciation of the yuan against the US dollar on the back of a recent rebound in foreign trade and renewed pressure from the US and Europe to lift the currency's value. 'We will keep the yuan at a reasonable level while continuing to improve its pricing system,' Zhong said. 'The legacy of the crisis is not over yet.' Expectation of a yuan appreciation has grown following a recent poll by the ministry and the Ministry of Industry and Information Technology on the impact of a stronger yuan on exporters. The yuan gained 0.1 per cent last year against the greenback to 6.82 after rising 16 per cent in the three years to 2008. Economists widely expected the yuan would rise about 3-5 per cent by the end of this year. Zhong did not comment on the poll. Danny Lau Tat-pong, chairman of the Hong Kong Small and Medium Enterprises Association, estimated that a higher yuan would effectively erode manufacturers' net profit margins, which were already thin at about 5 per cent. Economists at Morgan Stanley and the Nomura Research Institute forecast the Ministry of Commerce was likely to withdraw some export-supportive measures such as value-added tax rebates later this year as foreign trade recovered gradually. However, Zhong said export policies would be 'sustainable and stable' this year. He said the recovery in global demand was uncertain, which was likely to bring about a complex and difficult year for Chinese exports. Pointing to the low value-added nature and poor technology levels of Chinese exports, Zhong said priority would be placed on upgrading industries. 'We are the biggest exporter, but not strong,' he said, pointing to the fact that China overtook Germany last year as the world's largest exporter. 'So we won't chase after quantity, but quality.' He added that the mainland would double its efforts in pushing research and development while beefing up imports. China's exports were expected to return to a pre-crisis annual growth rate of above 20 per cent this year after a 16 per cent decline last year, economists said. Imports were down 11 per cent, which left the trade surplus 34 per cent smaller last year. Meanwhile, International Monetary Fund deputy managing director Murilo Portugal said the mainland's economy was improving so steadily that it was time to withdraw some monetary stimulus measures. He said advanced nations such as Australia should do the same and keep interest rates low.
