The Collapsing Euro Is Hammering Chinese Exports And Killing Chances Of A Yuan Hike

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Photo: Gabyu on flickr

A collapsing euro, and shaky Eurozone economy, is likely to send a shock wave to China’s export industry.China Daily:

“In April, the growth in exports to Europe still stood at 25 per cent, but the response is probably delayed. In May, June, and especially the third quarter, it will probably drop 6 to 7 percentage points,” Huo Jianguo, head of the Ministry’s think-tank, was quoted as saying in the Shanghai Securities News on Wednesday.

The impact, mainly from the fluctuation in the euro, is likely to hurt electronic and mechanic equipment makers, because their exports make up for more than half of the total volume, Huo added.

Meanwhile, U.S. exports to China surged nearly 50% in Q1 and will likely continue to do so given growth in China’s domestic demand.

Thus perhaps the yuan hike is on hold for this year, thanks to Europe, because any increase of the yuan vs. the dollar would make Chinese products even more expensive in Europe, while at the same time doing the same for products sold in the U.S. of course. That’s because, given a shaky euro, it’s feasible that a yuan-hike could wipe out China’s trade surplus right now.

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