China can stomach 5-6 pct yuan rise in ’11–paper

SHANGHAI, Nov 6 (BestGrowthStock) – China will be able to bear a 5
to 6 percent increase in the yuan’s exchange rate next year,
without significantly harming its export industries, an
official newspaper reported on Saturday, citing a government
researcher.

The outlook for China’s exports in 2011 is not optimistic,
with uncertainty over global demand likely to slow export
growth, the China Securities Journal said, quoting an interview
with Li Jian, a researcher with a think tank under China’s
Ministry of Commerce.

“I think next year the speed of renminbi appreciation will
not be much higher than this year’s. Some companies said that a
maximum renminbi appreciation of 5 to 6 percent would be
manageable, this makes sense,” Li said.

Li said that while pressure for China to allow the yuan,
also called the renminbi, to appreciate against the U.S. dollar
and a basket of currencies would continue to grow, a
substantial one-time large adjustment would pose a huge shock
to domestic economy, especially exports.

China has let the yuan gain 2.55 percent against the dollar
since it was depegged on June 19. Earlier in October, the yuan
gained around 2.8 percent ahead of a U.S. report stating
whether China was a currency manipulator. [ID:nTOE69E04V]

“Real effective exchange rates for the renminbi may
continue to rise, the appreciation is a medium to long term
trend,” the paper quoted Li as saying.

A stronger yuan is seen as a key component of China’s
reforms to cut its trade surplus and contribute to the
rebalancing of the global economy. Critics say that an
undervalued yuan gives Chinese exporters an unfair advantage.

But weak demand in developed economies including the U.S.
and Europe, where governments have a heavy debt burden, is set
to put a large strain on China’s exports in the coming year.

“Overall export growth this year will surpass 20 percent
but next year it may drop to 20 percent or even single digit
growth,” Li said.

While China’s export growth is set to slow, Li said demand
for imports will maintain solid growth in the medium term, with
demand unlikely to be affected by a moderate drop in investment
growth and domestic consumption.

(Reporting by Farah Master and Huang Yan)

China can stomach 5-6 pct yuan rise in ’11–paper