No relief from yuan pain for exporters

The mainland's struggling exporters will look in vain to currency regulators to help them survive a prolonged downturn in demand from their major foreign markets.

Beijing's recent efforts to let the value of the yuan rise, against a depreciation of the Japanese yen and rival currencies in emerging markets such as Brazil, may outweigh domestic considerations as President Xi Jinping meets his United States counterpart, Barack Obama, to shore up strategic and economic ties.

More importantly, the yuan's appreciation since last autumn may reflect policymakers' determination to allow market forces to have more influence in deciding the exchange rate, analysts believe. This means exporters will face greater pressure to upgrade their products and look for customers from emerging markets to substitute for shrinking demand from Western clients.

The situation looks particularly worrying after the weekend's data showed export growth slumped to just 1 per cent last month after regulators cracked down on cross-border hedging through over-invoicing and "round-tripping", a method used to channel hot money into the mainland by moving goods into and out of Hong Kong and bonded areas in fake deals.

Economists Liu Ligang and Zhou Hao at ANZ bank said: "China's export sector is losing competitiveness because of a strong yuan and rising trade protectionism."

The yuan had appreciated by almost 20 per cent against the yen this year, partly because of the quantitative easing in Japan, while other regional currencies had also depreciated following the weakness of the yen and the strong US dollar, ANZ said.

"We believe China's loss of competitiveness relatively to Asean (the Association of Southeast Asian Nations) and Japan will gradually show up in China's export data in the following months, which will have dire consequences for the already weak job markets," the bank said.