The appreciation of the yuan over the past year has accelerated the behavior of Chinese exporters selling foreign currency in exchange for the yuan. But in order to stop the appreciation of the yuan, China’s foreign exchange regulators have restricted exporters from dumping foreign currency, with Yiwu, Zhejiang Province, where many exporters are located, being the worst off.
Foreign media reports, since the second half of last year, the yuan has appreciated nearly 10%, so exporters are forced to seek hedging channels, eager to exchange dollars back to the yuan. But regulators fear that the yuan exchange rate is too volatile to affect capital flows, while damaging the economy, has been strict control of the yuan exchange rate, does not allow unrestricted cross-border remittances, and foreign currency can not be freely converted into yuan.
The report quoted sources as saying that since late November last year, the Zhejiang provincial foreign exchange regulator has asked commercial banks in Yiwu to accept only customs returns within the previous year to allow exporters to exchange their foreign currency earnings back into yuan. Compared to the past, Yiwu exporters can present customs forms at any Time, quickly exchanged back to the practice of RMB, it is clear that the current tightening of exporters foreign exchange measures.
Sources said that in order to avoid the restrictions, many companies had to buy “outdated” customs forms for conversion. Reports also said that Chinese regulators began taking a series of measures late last year to reduce capital inflows and allow more capital outflows.
Yiwu is a hub for exports of Chinese small goods such as Christmas trees, souvenirs and toys, and is seen as an indicator of China’s overall exports. Official figures show that Yiwu’s exports of goods were worth 300.6 billion yuan ($46.34 billion) last year, up 4.8 percent year-on-year and accounting for 1.7 percent of China’s exports last year.
Although Yiwu is China’s trading town, but last year because of the boycott of Australian coal and carbon, resulting in power restrictions, power outages, forced to rush to buy generators; and now because of the foreign exchange earned, but also to shoulder the important task of not allowing the rapid appreciation of the yuan, and even want to exchange the foreign exchange earned back to the yuan are blocked.
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