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As Yuan Weakens, Chinese Exporters Hoard Dollars

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As Yuan Weakens, Chinese Exporters Hoard Dollars

by CFO Innovation Asia Staff, 29 June 2012
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Finance and Banking
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exporters Yuan
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Chinese exporters are no longer rushing to convert their dollars to yuan, in anticipation that the Chinese currency is unlikely to appreciate more.
 
The Wall Street Journal reports that for four months in the past eight months, banks sold more foreing currency than they bought, a sign of the shift in corporate China toward hoarding dollars.
 
"In the past, we would exchange our dollar earnings for renminbi on the same day we received the payment," Fang Minghua, head of Saijia, a clothing company, told the newspaper. "Now, we're not in the rush to sell."
 
The recent weakness has come after China loosened the yuan's daily trading limits in April, one of the most significant moves to liberalize the currency since mid-2010, says the Journal.
 
The changes made by corporate treasurers are having an impact on China's monetary policy.
 
The People's Bank of China has slashed banks' reserve-requirement ratio, known as RRR, three times since November to help banks lend more. The ratio measures the share of deposits banks are required to hold as reserves.
 
PBOC officials have indicated that banks' foreign-exchange positions play a major role in the central bank's decision to reduce banks' reserve requirements. PBOC Gov. Zhou Xiaochuan has indicated that such cuts are a tool to offset the impact of companies hoarding dollars.
 
 
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In a Shift, Chinese Exporters Cling to Dollars
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CFO Innovation Asia Staff
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