Photo Source: Talent in China
It was inevitable hat the Yuan would eventually rise as the large trade surplus that China currently operates made its way back to businesses. As the Yuan has accelerated, the rise has slowed down the economy, indicate by the slowing of exports and manufacturing growth. Export orders are down for the third straight month in a row and the Purchasing Manager’s Index fell from 53.3 to 52.
The barometric tools used to assess this data are evaluated on a scale from 0 to 100. Over 50 is considered growth, while under 50 a contraction. Knowing the data fell from 53.3 to 52 signals a contraction in growth, but not a fall overall. Chinese manufacturing is growing, but not by the same rate as it once was.
Rising Yuan currency, falling orders
Slowing orders are almost a direct result of the gain in the Yuan’s value, especially against the US dollar, where the credit crunch has hurt consumers. Limited credit and high inflation has dropped the value of the dollar, while the Yuan has advanced even with higher inflation. Inflation in China stems from its profitable exports rather than irrational central banks.
A more expensive yuan means exports are more expensive. Thus, marginal exports are quickly eliminated as the price rises due to either fuel costs or a higher currency cost. A small advantage in pricing is wiped out in just a few days of currency trading, where rising and falling currency prices easily put a firm out of business.