Under United States pressure to give a market value to its currency, China has begun setting its currency at a higher rate against the dollar – a move welcomed by economists as a more accurate reflection of China’s huge buying power following massive exports growth in the last ten years.
China’s yuan is now worth more, allowing China to increase imports. Australia’s mineral exports to China are already well established. However, in addition, an agreement has been signed this week with the Australian government for Tasmanian apples, clearing quarantine hurdles and paving the way for Aussies to capitalise on the giant Chinese market.
The new agreement lifts China’s previous requirement to carry out surveys for European canker and fire blight – two diseases of quarantine concern to China, that are not present in Tasmania or the rest of Australia.
China has recognised Tasmania’s pest free area status for fruit flies and the network of trapping and surveillance that supports it, along with a workable monitoring and control program for apple codling moth, and orchard management of light brown apple moth, woolly apple aphid and brown rot.
Minister for Agriculture, Fisheries and Forestry Tony Burke said:
“The total value of Australian horticulture exports consisting of fresh and processed fruit, nuts and vegetables was $1.29 billion in 2008–09.
These new quarantine conditions are a tremendous boost for our important horticultural industry and I commend the Australian and Chinese authorities for reviewing the agreement which now allows Tasmanian growers to access the Chinese market under workable protocol requirements.”
The Yuan hit a high against the US dollar this month of 6.8007 per US dollar. China had previously shielded its exporters through an artificial exchange rate of 6.83 Yuan per US dollar. Yuan exchange rates are set by the People’s Bank of China, which said in a statement this month:
In view of the economic and financial development in China and abroad, particularly China´s Balance of Payments (BOP) situation, the People´s Bank of China (PBC) has decided to further reform the RMB exchange rate regime and increase the RMB exchange rate flexibility…
…As China´s BOP is now moving closer to a more balanced position, prices of labor, raw materials, land and other capital goods have become higher, which raises the cost of China’s export. The basis for a large-scale RMB appreciation does not exist as the RMB exchange rate is moving closer to its equilibrium level…
…While a floating RMB exchange rate will promote a more balanced BOP account in general, it dose not address bilateral trade imbalance with any particular country.
The United States has been hoping to reduce its own balance of payment deficit by forcing China to compete on fair currency terms. However, the transnational nature of China’s production will mean that Chinese exports remain as competitive as ever as the raw material buying power of the Yuan increases.
