Yuan’s strength slows China’s exports
Overall foreign trade rose by 10.1 percent: customs data
The yuan’s continued strength slowed the growth of China’s exports in August.
Data from the General Administration of Customs on Friday shows the country’s exports surged by 6.9 percent to 1.35 trillion yuan ($209 billion) in August from the same period last year, a sharp drop from the 11.2 percent growth seen in the previous month.
China’s imports surged by 14.4 percent in August. Overall, the country’s trade surged by 10.1 percent on a yearly basis, customs data showed.
Zhou Yu, director of the Research Center of International Finance at the Shanghai Academy of Social Sciences, said that the strengthening yuan affected exports growth.
The yuan’s central parity exchange rate reached 6.5032 on Friday, up 237 basis points. The rate was the highest since May 12, 2016. As of Friday, the yuan had been surging for nine consecutive trading days.
The yuan had been depreciating since mid-2015, when the government launched reforms to the central parity exchange rate mechanism. But the trend reversed this year, and the cur- rency has risen by about 6.4 percent so far in 2017.
“The yuan has been surging too fast. It’s bad for the domestic economy,” Zhou noted. An appreciating yuan creates a negative impact on exports.
The government has taken measures to curb the yuan’s rise, as shown by the rising foreign currency reserves in recent months. But the yuan continues to rise, which means that there is upward pressure on the currency, Zhou said.
China’s foreign currency reserves have reached $3.09 trillion, data from the People’s Bank of China, China’s central bank, showed on Thursday.
“The government took measures to reduce the range of the yuan’s fluctuations, but not to completely reverse the currency’s trend,” Zhou said, adding that the yuan’s appreciation shows that China’s previous measures to control capital outflow have worked.
An appreciating yuan doesn’t necessarily mean that China’s exports will be ruined, as a strong overseas demand can offset this, said Zhou.
The China Merchants Securities said in a statement it sent to the Global Times on Friday that it’s highly probable that exports will pick up in September and October.