Canton Fair exhibitors prefer short orders as exchange rate widens
2012-May-10 Source:
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In the spring Canton Fair this year, exhibitors have tended to contract short orders with foreign buyers to counterbalance the fluctuating RMB exchange rate against USD.The People's Bank of China announced on April 14 that the trading band of RMB against USD in the spot interbank currency market would be widened from 0.5 percent to 1 percent, effective on the next day when the spring Fair opened. Analysts said that Chinese exporters would face the risk of the uncertainty of exchange rate fluctuation in future, instead of an appreciation of RMB."International trade has a very close relationship with exchange rate. The fluctuation of exchange rates brings constant change on manufacturing costs and the instability on export," said Liu Jianjun, spokesman of the Canton Fair.Being afraid of losing out from an uncertain exchange rate, some exporters hesitated to accept orders or accepted short-term orders only.Jiang Jinfeng, deputy general manager of a state-owned battery manufacturer in Guangdong, told local newspaper New Express that the fluctuation weakened the purchasing power of international markets. "I accepted orders of three months in the previous sessions of Canton Fair, but I basically accept only one-month orders now."According to the organizer's official report, orders within six months account for 86.3 percent of all settled orders in the Fair.Some exporters took more active actions. Cao Yunhui from an electronic product manufacturer in Guangdong told Xinhua the company had contacted the banks earlier this year to fix the exchange rate for a year to avoid the risk. Luo Hongyu, manager of Foshan's ceramic manufacturer, told New Express that the company requested some buyers to have all payments settled when giving orders.Some other companies bought financial derivatives to hedge the loss brought by fluctuation, as reported by New Express.The spokesman of the Fair emphasized it was important for exporters to enhance the competitiveness of the products, in order to strengthen the pricing power of the company and overcome the impact of exchange rate fluctuation.

Editor: Olivia
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