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Exchange Rate Largest Concern for Chinese Exporters

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Wan Linzhong runs a factory in eastern China's Jiangsu Province, exporting electronic LED signs, light boxes and neon signs to Europe and United States. His major concern is a stronger yuan, or China's currency renminbi.

Like most exporters attending the 107th China Export and Import Trade Fair, or Canton Fair in the southern city of Guangzhou, Wan worried that a stronger yuan would further squeeze the already thin profit margin in his company and make the products more expensive and thus less competitive.

"If the exchange rate of yuan increase one percent, our profits will drop more than 10 percent," said Wan, manager of the Yancheng Novelty Electronic Co., Ltd.

After China overtakes Germany to be the world’s largest exporter, the country is under increasing criticism that it keeps the yuan undervalued to benefit domestic exporters. Some US lawmakers even proposed legislation to impose tariffs on Chinese goods unless China allowed the yuan to climb.

The central parity rate of yuan was 6.8261 per US dollar Friday, according to the China Foreign Exchange Trading System. The currency is allowed to float on the interbank market within a daily limit of 0.5-percent each way of the central parity rate.

After China unpegged the yuan from the US dollar more than four years ago and allowed it to fluctuate against a basket of currencies, the currency gained 21 percent before stabilizing against the dollar in the middle of 2008.

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