China’s yuan gains ground after rate cuts, exporters’ US dollar exodus

For Zheng Bo, August was the tipping point.

Up to then, exporters like Zheng had been hoarding their US dollar holdings to reap higher returns – sometimes as much as 5 per cent annually – compared to yuan deposits with typically lower yields.

But some exporters expressed concerns over the impact a sustained appreciation of the currency would have on profits, as Chinese exports could become more costly and less competitive when weighed against goods from other countries.

“This [the appreciation of yuan] is not good for us, since the domestic economy is still in overcapacity,” Zheng said. “It will be difficult to grow export orders next year for most industries.”