Manufacturers fail to profit from weak yuan

Visitors at the machinery section of the Canton Fair in Guangzhou, Guangdong province. [Photo/Xinhua]

Chinese machinery manufacturers have found it difficult to profit from the recent depreciation of the renminbi in the short term, company executives said.

Exhibitors from the machinery sector at the 120th Canton Fair in Guangzhou, Guangdong province, said the yuan depreciation, to its lowest level in six years against the dollar, had limited effect in boosting their business.

That was because many importing countries were themselves encountering depreciation pressures on their currencies－and some domestic manufacturing rivals had instigated a price war.

"Some of our clients in Indonesia, for example, are experiencing tough currency depreciation pressure against the dollar, so they were reluctant to spend and put off big purchases in the past few months," said Xiao Dan, general manager with Wuxi Kipor Power Co Ltd in Jiangsu province.

Even though many machinery manufacturers are under pressure to increase profit, China's machinery exports only grew by 3 percent on a year-on-year basis between January and September.

China's investments in railway projects in African countries including Nigeria, Ethiopia and Djibouti have also boosted exports of the country's power generating equipment, construction machinery, telecommunications, railway vehicles and signal systems.

"Logically speaking, exporters should profit more from a better price when the yuan depreciates," said Ji Sunmin, deputy sales director of Suzhou Jinding Machinery Manufacturing Co Ltd.

Another problem was that international buyers were pushing down prices as the yuan depreciated. However, they seldom raised their prices even when the exchange rate recovered, said He Hui, sales manager at Fujian-based United Power Equipment Co Ltd.

In the long run, the yuan depreciation could have some impact on foreign trade growth, as the processing trade remained a larger proportion in China's trade structure, said Huang Songping, spokesman of the General Administration of Customs.