Exchange Rates Euro Causes Chinese Exports To Shrink

April 27th, 2012

An unfavourable exchange rates euro is hitting Chinas exports into Europe badly. Exports are significantly down, to the extent that some of the smaller manufacturing factories have been forced to shut down. The Guangdong province which is one of China’s most heavy manufacturing regions has seen over 450 small to medium sized companies close in the last 10 months of 2011 /2012.  Projections for the next year are no more favourable, with next year’s projections looking even gloomier. Reserves of foreign exchange have lost their value and exchange rates euro are so poor that it is no longer economically attractive for European companies to import from China, which was the original appeal when the Eurozone first opened for business. The picture is quite disturbing, some economists have forecast that the euro debt crisis could see China in the midst of its first ever trade deficit.

Best Exchange Rates UK have been reporting on the euro debt crisis and its impact on individual countries around the world, the general picture emerging, is that the entire world economy is suffering a blow from the euro debt disaster. China has represented the world as the main engine for global economic growth in recent years, so any economic pain endured by China, will doubtlessly ripple throughout the world economy.

A staggering one fifth of China’s total export is to the countries of the European Union, and the unfavourable exchange rates euro is hitting every industry sector, primarily consumables like toys, electrical equipment and clothing. This could change the landscape of Chinas economy from one of export to one of domestic consumption.

China is currently holding a trade surplus of approximately $150 billion, this surplus has been declining year on year for the last 3 years as a result of reduced export to Europe and the US, to the extent that economists are predicting what was previously considered unthinkable –China could end up in a trade deficit situation.  Exports will not be the only economic repercussion – the flow of capital and foreign exchange reserves values will also take a blow. Keep up to date with the best exchange rates at Best Exchange Rates UK.