Strong Yuan puts pressure over Chinese auto exports image

China posted stronger manufacturing growth for the fifth straight month in April, but the appreciation of the yuan against the U.S. dollar has further cast a shadow over Chinese automobile exports.

Chinese exports of cars and trucks reached 849,500 vehicles last year, up 50% from 2010, according to the China Association of Automobile Manufacturers. Such exports are expected to grow at a similar annual pace over the next few years.

But the appreciation of China’s currency and problems such as fierce competition, low profit margins and the lack of a sound after-sales network all impeded the export of Chinese-brand automobiles, but the export market is growing faster than the domestic one, said Wang Fengying, president of Hebei province-based Great Wall Motors.

“However, there is a long way to go before Chinese-brand vehicles become big international names like Toyota and Volkswagen,” Wang said.

The People’s Bank of China set the dollar/yuan central parity rate at 6.2670, the lowest level since China depegged its currency from the dollar in 2005 and down from Friday’s 6.2787. The reference exchange rate is also lower than Friday’s close of 6.3102 in over-the-counter trading.

Exporters currently are in no hurry to sell dollars because of expectations that the yuan may not be able to keep rising against the dollar unilaterally,” said a Shanghai-based foreign bank trader.++
However, the People’s Bank of China (PBOC) believes the yuan is close to a “balanced level.”