Yuan appreciation dampens textile export prospects

China's textile products are losing markets among foreign buyers because of the appreciation of China's currency, the yuan or Renminbi (RMB), against the US dollar.

The textile firms wooing foreign buyers at the 2008 International Textile, Fabrics and Accessories Exhibition held in east China's Zhejiang Province have felt the pinch. "The price of a cotton T-shirt exported to the United States is $3.8 or $3.9 now, 10 percent higher than before," said Kong Liang, director of the sales department of Zhejiang Yonglong Enterprise.

"We have lost many foreign buyers," he said.

The Chinese currency was set to trade at 6.992 yuan against the US dollar on April 10, breaching the 7-yuan mark for the first time since the government unpegged it from the dollar in 2005. The Yuan has gained about 18 percent since 2005.

"This has made Chinese textile products more expensive. The price advantage has almost vanished compared with products from Viet Nam and Indonesia," Kong said.

"With good quality and lower prices, Chinese textile goods are competent. However, the appreciation of RMB has made it difficult for me to cooperate with the Chinese textile firms," said Satish Batavia, a businessman from India.

If the yuan hit a new high to reach 6 yuan to the dollar, he would consider cooperating with Vietnamese or Indonesian providers instead of Chinese, Batavia added.

European buyers were not much concerned about the yuan's appreciation, because the Euro has been performing strongly.

However, according to Werner Freistatter, an Austrian businessman, many Chinese textile companies planned to raise prices because of rising material and labor cost, which made him hesitate about making decisions.

Although gradually losing price advantage, many foreign and domestic officials, businessmen and scholars still have confidence in the Chinese textile goods because of their good quality.

"The Chinese textile companies have advanced technology and equipment compared with the textile products made in Viet Nam and Indonesia, and most importantly we enjoy quality advantage," Kong said.

Source: China Daily