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Yuan appreciation would 'worsen job situation'
( 2003-07-25 10:42) (China Daily)

The appreciation of the yuan could wipe out millions of jobs in China and worsen the country's already-grim employment situation, leading labour experts and economic researchers warned Thursday.

They said an expected drop in exports and foreign direct investment (FDI) will cost jobs if the government caves in to growing international pressure to raise the value of the yuan.

The warning came as the government, in its latest effort, made clear its determination not to allow its currency to appreciate, at least in the short run.

Despite an overseas chorus led by Japan to press Beijing to revalue the yuan, both Chinese officials and economic researchers said that maintaining the stability of the yuan is conducive to the national economy as well as a global economic recovery.

A revaluation of the yuan may plunge the Chinese economy into a long-term recession, they warned.

The Chinese currency has been trading at 8.2765-8.2780 against the US dollar for some years.

"Besides tremendous economic costs, we cannot underestimate the impact of allowing the yuan to appreciate on the tight job market due to the Chinese economy's increasing dependence on exports," said Mo Rong, deputy director of the Institute of Labour Studies at the Ministry of Labour and Social Sciences.

He told China Daily that cheap labour costs have been making the biggest contribution to the country's surging exports.

A yuan revaluation, however, will definitely undermine the advantage of competitively-priced Chinese exports, most of them labour-intensive ones such as shoes, toys, clothes and textiles, by pushing up export prices.

In order to offset a rise in prices, exporters are expected to, first and foremost, resort to mass lay-offs to cut labour costs, according to Mo.

"If that, unfortunately, happens, millions of workers employed by export enterprises will be forced to lose their jobs," the researcher said.

Mo stressed that the huge amount of job cuts to be caused by a yuan revaluation is something that China cannot afford to, given an estimated 2 million job losses because of the economic fallout of SARS (severe acute respiratory syndrome).

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