More Yuan Appreciation Stress Tests Expected-Shanghai Metals Market

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More Yuan Appreciation Stress Tests Expected

Data Analysis 08:37:17AM Mar 19, 2010 Source:SMM

BEIJING, Mar. 19 -- China will conduct a new round of stress tests late March to see how much yuan appreciation domestic and foreign comapnies in Shanghai and the provinces of Guangdong, Zhejiang and Jiangsu and can withstand, the 21st Century Business Herald reported on Thursday.

The Ministry of Finance and the Ministry of Industry and Information Technology jointly conducted the first round of stress tests last month in the labor-intensive sectors, the report said.

The new round of tests will be conducted on a wider scale, covering both conventional trade and processing trade, and will investigate both domestic and foreign enterprises in China to learn more about the differences of sectors and firms in dealing with yuan appreciation pressure.

Some trade associations of industries that may be affected by yuan appreciation will also cooperate in the tests.

According to an initial estimate focused on textile, 10 percent of the enterprises with 500 or more employees, which contribute to about 90 percent of the industry's total profits, can better deal with yuan appreciation. For the other 90 percent, yuan appreciation will have a big impact as they have lower profits and bargaining capabilities.

Zhou Shijian, senior analyst with the Sino-US Relations Research Center of Tsinghua University, said these 90 percent enterprises employed about 25 million people. If they were hit by the yuan appreciation, a large population could face the threat of losing their jobs, which would directly affect social stability.

Yuan appreciation would also erode the profits of enterprises in the export sector, the report said.

Wang Chao, assistant minister of commerce had said these tests were regular investigations, implying that the launch of the tests was not a signal that the government would adjust its stance.
 

More Yuan Appreciation Stress Tests Expected

Data Analysis 08:37:17AM Mar 19, 2010 Source:SMM

BEIJING, Mar. 19 -- China will conduct a new round of stress tests late March to see how much yuan appreciation domestic and foreign comapnies in Shanghai and the provinces of Guangdong, Zhejiang and Jiangsu and can withstand, the 21st Century Business Herald reported on Thursday.

The Ministry of Finance and the Ministry of Industry and Information Technology jointly conducted the first round of stress tests last month in the labor-intensive sectors, the report said.

The new round of tests will be conducted on a wider scale, covering both conventional trade and processing trade, and will investigate both domestic and foreign enterprises in China to learn more about the differences of sectors and firms in dealing with yuan appreciation pressure.

Some trade associations of industries that may be affected by yuan appreciation will also cooperate in the tests.

According to an initial estimate focused on textile, 10 percent of the enterprises with 500 or more employees, which contribute to about 90 percent of the industry's total profits, can better deal with yuan appreciation. For the other 90 percent, yuan appreciation will have a big impact as they have lower profits and bargaining capabilities.

Zhou Shijian, senior analyst with the Sino-US Relations Research Center of Tsinghua University, said these 90 percent enterprises employed about 25 million people. If they were hit by the yuan appreciation, a large population could face the threat of losing their jobs, which would directly affect social stability.

Yuan appreciation would also erode the profits of enterprises in the export sector, the report said.

Wang Chao, assistant minister of commerce had said these tests were regular investigations, implying that the launch of the tests was not a signal that the government would adjust its stance.