Experts:Moderate RMB Appreciation Does Not Impact Chinese Export Industry Too Much

It's reported that as the Chinese currency appreciates, the country's export industry is losing its advantage to other Asian countries like India and Vietnam. But some experts believe a moderate appreciation of the RMB would not have a significant impact on China's exports in the long run. Wu Jia has more.

A recent survey by Global Sources, an internet based international trade platform, indicates that half of nearly 400 foreign importers said they may increase their number of purchases outside the Chinese mainland to cope with RMB appreciation.

Mr. Wei is General Manager of Metal Mesh Filters Factory in Hebei Province. He says his company has to keep prices low to attract customers.

"RMB appreciation along with increasing labor and crude material costs has made our costs increase by 20 percent. But we cannot increase our products' prices or buyers will choose suppliers abroad."

But Tu Xinquan from the China National Institute of the World Trade Organization points out that while RMB appreciation has negative effects on export, it is generally not a bad thing.

"RMB appreciation does generate pressure on the export industry, especially on the low value-added sectors. But it will help promote their industrial restructuring."

Low value-added industries mainly produce textiles, clothing, toys and leather. Most of them are located in the eastern coastal areas.

Tu xinquan says RMB appreciation affects domestic costs such as labor costs and local taxes the most. But he says improving labor costs and increasing taxes for a stronger social security system is what this country needs.

However, Han Fuling, from the Central University of Finance and Economics, says that many export-oriented enterprises can only survive a moderate RMB appreciation.

"If RMB appreciation exceeds the profit margins of most enterprises, they may suffer a fatal attack."

He says Chinese enterprises can survive through their own efforts if the appreciation rate against the U.S. dollar is below 10 percent.

The China National Textile and Apparel Council says the average profit margin of the textile industry is less than 5 percent. If the RMB appreciates more than 5 percent, half of the country's textile enterprises will receive a serious blow.

Some enterprises have already set up branches in areas with cheaper labor costs. Others have turned to the domestic market.

Last year, China's trade surplus decreased more than 6 percent compared to 2009. And the total appreciation of the RMB against the U.S. dollar exceeded 3 percent.

For CRI, I'm Wu Jia.