COVID fight to help stabilize trade growth

0 Comment(s)Print E-mail China Daily, May 17, 2022
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China's dynamic zero-COVID policy will help put the growth of its foreign trade on a firmer footing and mitigate the impact of fluctuations in the Chinese renminbi exchange rate against the greenback on business this year, experts and business leaders said on Monday.

They made the comments after the Shanghai municipal government announced last week that more than 4,400 industrial enterprises of the designated size of annual revenue of 20 million yuan ($2.95 million) and above have resumed operations and that the city will gradually resume commercial business from Monday.

The dynamic zero-COVID policy, which sets a number of epidemic control targets and guidelines, is providing a stable direction for enterprises in terms of planning, investing resources and adjusting growth goals, said Zhou Mi, a senior researcher at the Chinese Academy of International Trade and Economic Cooperation in Beijing.

Besides, the nation has been improving its dynamic zero-COVID policy by adopting more effective measures, to better coordinate epidemic control steps and development policies, he said.

State-owned Shanghai Zhenhua Port Machinery Co, or ZPMC, one of the world's biggest port machinery manufacturers by market share, said that its Changxing manufacturing base in Shanghai's Chongming district has delivered 52 units of cranes and other giant-sized port machinery to its clients across the worlds in the first four months of this year.

Zhou Yafen, deputy general manager of Zhenhua Port Machinery's Changxing branch, said the dynamic zero-COVID policy has made it possible for factories in China to consistently churn out products needed by many other countries, ensuring the stability of international supply and industrial chains.

The executive said both manufacturing businesses' production capacity and export volume in China's Yangtze River Delta region will rebound when Shanghai fully eases COVID-19 restrictions in the future, as it would be easier for businesses to gather sufficient production materials from other parts of the country and the world.

Chen Jia, a researcher at the International Monetary Institute of Beijing-based Renmin University of China, said once the impact of the epidemic diminishes, the country's key role in various spheres at the global level, and the resilience of its supply and industrial chains, will help stabilize the exchange rate of the Chinese yuan as well as exports.

Owing to short-term shocks, such as the resurgence in COVID-19 cases, the offshore RMB dropped sharply on Friday, slipping below 6.80 per dollar to a low of 6.82, also its weakest since September 2020.

Gao Shiwang, director of the Industry Development Department at the China Chamber of Commerce for Import and Export of Machinery and Electronic Products, said the depreciation of the RMB is good news for exporters settling sales in US dollars. But, its influence on overall Chinese exports is quite complicated, as many currencies have depreciated against the US dollar. This would mean the RMB may be relatively more expensive compared to some foreign currencies like the Japanese yen.

"Moreover, amid the weakening yuan, exporters may also face more requirements from clients on adjusting export prices," said Gao, adding even for exporters, the RMB staying within a reasonable range is far more preferable to its value dropping.

He suggested exporters should adopt more financial tools to hedge against the exchange rate risk.

Although the recent depreciation of the RMB has boosted the profit of Ningbo Sunlong Imp & Exp Co Ltd, a Zhejiang province-based garment exporter, it is vital for exporters to make a wise prediction and choose reliable banking institutions to properly carry out hedging and value-added business, in order to minimize the effect of exchange rate fluctuations on their business, said Wu Song, the company's general manager.

Last week, an official of the China Banking and Insurance Regulatory Commission said China's huge trade surplus and foreign direct investment will provide stability to the RMB exchange rate as the overall performance of the Chinese currency is solid.

The latest RMB exchange rate pullback is a normal market reaction to a rise of the Chinese currency against the US dollar for a fairly long period since last year, the official said.

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