As China’s yuan gets stronger while Ukraine crisis drives up raw material prices, exporters shy away from US dollar
- Some Chinese manufacturers fear losses could mount if the yuan further appreciates to 6.25 against the US dollar, as it would make their exports less competitive
- A stable yuan is an important prerequisite for Beijing to grow exports, which remain integral to China’s economic growth
As the escalating Ukraine crisis further drives up prices of raw materials, China’s exporters are also bracing for their bottom lines to be hit on a second front – a strengthening yuan against the US dollar.
“We can’t understand why the yuan is still appreciating so much in anticipation of the dollar rising as the US Federal Reserve will hike interest rates,” said Jason Ding, who ships car parts mainly to East Africa from Guangdong province.
“We were thinking of holding the US dollar and waiting for the exchange rate to float, but now we have to convert most of it back to yuan.”
Soaring raw material costs have already inflated the prices of Ding’s products, but he is unwilling to lift prices any further, out of fear of losing out to competitors.
“The competition is fierce here,” Ding said. “We only increased ex-factory prices of the products about 5 per cent while raw material prices have been soaring.”