Yuan's Drop Propels China's Export Powerhouse
SINGAPORE -- Asian companies already are scrambling to compete with the low-cost manufacturing centers of China. Now, a dropping U.S. dollar on world currency markets may help China become an even tougher competitor.</br></br>U.S. Treasury Secretary John Snow has recently redefined Washington's longstanding policy of support for a strong dollar, a move currency markets have taken to mean that the U.S. is willing to see the dollar continue to weaken against other currencies.</br></br>That is worrying in itself to many Asian companies and governments. A weaker dollar forces Asian exporters to the U.S. to either increase prices or swallow dwindling revenue when they convert sales into their own currencies.</br></br>But what is worse to some is the effect the dollar's slide is having on China's yuan, which Beijing keeps virtually pegged to the U.S. currency. Most other Asian countries also try to manage their currencies to maximize stability and minimize gains against the dollar. The difference is that the yuan doesn't trade freely in global currency markets like most other Asian currencies. Asian countries can't hope to hold out against the $1.5 trillion-a-day currency markets for long when the trend is running against them. As the yen, the won, the baht and the Singapore dollar strengthen against the U.S. dollar, they also strengthen against the yuan.</br></br>"A weakening U.S. dollar will help China boost exports," says Li Yushi, vice director of the Chinese government's Academy of International Trade and Economic Cooperation.