Retailers Hope China Currency Move Will Ease Conce
Washington, DC, July 22--The National Retail Federation yesterday expressed hope that China's decision to revalue its currency will help ease anti-China sentiment in Congress.
"We hope that Congress will view this as a positive step by the Chinese government and that the debate over trade with China will now be driven less by emotion and more by sensible discourse," NRF Vice President and International Trade Counsel Erik Autor said. "The Chinese government has said that their ultimate objective is to move to a complete float of their currency. That isn't going to happen overnight, but this is a significant step in that direction."
"To the extent that this alleviates concerns on Capitol Hill, retailers may feel more comfortable about ordering merchandise from China," Autor said. "A number of major retailers have limited orders in recent months because of the unpredictability brought by safeguards cases, pending legislation and other moves to restrict trade with China. Retailers are looking for stability and predictability. Knowing that a major order won't be blocked by a political decision is more important than minor fluctuations in price brought by currency revaluation."
Autor said any increase in the cost of Chinese-made goods as a result of the rise in value of the yuan is likely to be nominal and unlikely to be large enough to discourage retailers from sourcing merchandise in China.
The Chinese government announced today that it would end the decade-old policy of tying the yuan to the U.S. dollar, a practice that critics say artificially under-prices Chinese imports. The yuan had been pegged at 8.28 to the dollar, but will increase about 2.1 percent on Friday to 8.11 to the dollar. The yuan will be tied to a basket of currencies in the future, and will be allowed to float in a trading band of plus or minus 0.3 percent.
NRF has lobbied strongly against legislation sponsored by Senator Charles Schumer, D-N.Y., that would impose a 27.5 percent tariff on all goods from China unless the Chinese government agrees to revalue the yuan. NRF has argued that the legislation would increase prices for U.S. consumers while doing nothing to create or protect U.S. jobs. Ultimately, the measure would force retailers to import merchandise from other low-cost foreign suppliers because domestic manufacturers no longer produce most of the products targeted by the tariff at competitive prices or in commercial quantities.
