China’s exporters enjoyed the benefits of a weak yuan. Now that’s changing and cutting into profits
BEIJING — Chinese companies seeking growth from exports face a new challenge: a strengthening yuan.
The “offshore” yuan traded in Hong Kong surged Monday against the U.S. dollar to its strongest level for 2024 — below 7.1 — before weakening slightly to around 7.18 as of Wednesday afternoon, according to Wind Information.
The sharp moves came amid a global stock market sell-off as investors reassessed their outlook for the U.S. economy and potential interest rate cuts. High rates have bolstered the U.S. dollar and related assets.
A strong greenback has also helped keep the Chinese yuan weak, which in turn kept Chinese exports competitively priced abroad. After steadily weakening in the first half of the year, the offshore yuan has strengthened against the U.S. dollar over the last month.
Many trade companies, especially smaller ones, have “currently adopted a strategy of ‘preferring not to take orders rather than take loss-making orders,'” Winnie Wang, president of the Shenzhen Cross-Border E-Commerce Association, said Tuesday in Chinese, according to a CNBC translation.
She noted the case of one such company, which made 20 million yuan ($2.8 million) in revenue during the yuan’s weakening during the first half of the year, allowing it to raise employee salaries. But she said the company did not win a single order in July because the stronger yuan forced it to repeatedly raise its prices.