The Hindu Business Line : Yuan change: No major benefit seen for textile exporters

It was unlikely that major buyers would be moving base to India because of yuan appreciation. It would require an appreciation of 10-15 per cent to have buyers rethinking outsourcing strategies.

Mumbai , July 22

THE revaluation the Chinese currency may not bring about any major benefit to Indian textile exporters as the appreciation of the currency is small to have any major impact, according to exporters and analysts.

The yuan appreciated against the US dollar by 2.3 per cent, after China scrapped the yuan's peg to the dollar and tied it to a basket of currencies.

According to Mr M.P. Gajaria, Advisor, GTN Group, "The upward revaluation is too small to be beneficial in terms of price competitiveness." He added that China was very efficient price-wise in the manufacture of textiles and apparel and it was likely that Chinese manufacturers would absorb the increased cost and still be very competitive.

According to an industry expert, even with the revaluation the Chinese product would be far more competitive than that of competitor nations. He added that the move by the Chinese Government was intended to appease the US and European Governments and avoid further safeguards being imposed for its high volume textile exports and its high export surplus - a sore point for the US Government.

He added that it was unlikely that major buyers would be moving base to India because of this currency appreciation. It would require an appreciation of 10-15 per cent to have buyers rethinking outsourcing strategies.

According to Mr Baqar Iftikhar Naqvi, Manager, KSA Technopak, the next six months would see whether the yuan would witness a `market-oriented' revaluation. He added that while Indian exporters did feel the heat when the dollar appreciated, Chinese exporters would largely remain unaffected. He said the yuan's move from a controlled environment to being determined by the market was just the beginning.

According to Mr Srinivasan Varadarajan, Managing Director, Head of Markets, JP Morgan, the yuan revaluation is not likely to have a long-term impact on the rupee. The value of the rupee would be determined by trade and capital flows into the country.

Thursday's sudden spurt in the rupee against the dollar was an instance of Asian currencies strengthening in line with yen, which is truly a free float, said Mr Ajay Mahajan, Group President, Financial Markets, Yes Bank.

The rupee is likely to touch levels of 44 in the next few months, as it is currently overvalued on a Real Effective Exchange Rate basis, he added.

For the yuan revaluation to have any impact on exports, Mr Mahajan, said the Chinese currency must appreciate by 6-10 per cent.

"In any case India and China export to different markets. China is also far ahead in its share of exports to the world markets," he said.

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