WASHINGTON, April 30, 2008 (AFP) – The rapid appreciation of the Chinese currency against the US dollar is taking a big toll on Asian companies using China as base for exports to the United States, according to a top US business official. The yuan has risen 18 percent against the dollar since China abandoned a peg in July 2005, and the currency breached a key psychological level of 7.0 yuan to one dollar on April 10.
The higher yuan makes US exports more competitive with Chinese goods in their home market, while business costs for largely Asian companies producing and exporting from China will rise as they pay more local currency for labor and raw materials and sell their products to the US market in dollars.
Meanwhile US firms manufacturing inside China, most of which aim their goods for the huge Chinese domestic market, are not as greatly affected, said US-China Business Council President John Frisbie.
“I think it is probably a bigger issue for all those companies from other economies in Asia that have invested in China for the US market,” he told AFP. “And that’s companies from Japan, Korea, Taiwan, Hong Kong, Malaysia and Singapore.”
Frisbie said many Asian companies selling to the US market had shifted their produc