Eurozone crisis' ripple effect felt in China
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E-mail Xinhua, June 28, 2012
A solution to the eurozone's fiscal woes is not expected in the near future, despite a two-day meeting by the leaders of EU members states on Thursday to discuss a solution to the crisis.
The crisis has triggered an economic recession and even stoked fears of a dissolution of the eurozone. Its ripple effect, however, has reached all the way to China, a major trading partner of the EU.
Chinese exporters are among the direct victims of a crisis that has led to high unemployment, a reduction in consumer spending and a corresponding depletion of demand for Chinese-made goods.
Small clothing companies in south China's Guangdong province are feeling the pinch. Their profits have already been squeezed by the Chinese currency's sharp appreciation against the euro, as well as increases in the cost of labor and raw materials.
The Chinese yuan has appreciated by 23 percent against the euro since 2010, making Chinese goods less competitive in the eurozone.
"Despite higher costs on our side, European traders still ask for lower prices. We are left with lower profits," said Shen Yonglin, chairman of Guangzhou Shenshi Clothing Co.
Shen said he has been more fortunate than others, as most of his customers are from Britain and France, rather than Spain and Greece, which are on the frontlines of the eurozone debt crisis.
Shen said the Asian financial crisis in 1997 and subprime mortgage crisis in 2008 taught him to focus on management and product quality, as well as build stable customer relations,ย in order to make the 30-year-old company more resistant to possible future crises.
Many exporters have cut payrolls in response to declines in overseas orders and hired temporary workers to cope with any surges. Workers who have been able to keep their jobs have been met with pay cuts.
Jiang Wenbin, a skilled migrant worker from southwest China's Chongqing municipality, said his monthly salary was cut by 1,000 yuan (157 U.S. dollars), as the clothing plant where he works has received fewer orders from Europe.
Shen said the clothing industry is facing a challenge in the form of younger migrant workers who refuse to do the low-paid manual labor that was embraced by older generations of migrants.
China should draw a lesson from the European debt crisis by adjusting its economic structure to boost its competitiveness while avoiding high government debt, said Guo Tianyong, a professor from the Central University of Finance and Economics.
The eurozone's debt woes have also been a headache for many Chinese stock investors, who have blamed the lingering crisis for their losses.
China's benchmark Shanghai Composite Index has slumped about 21 percent since 2011, as domestic slowdown concerns coupled with the eurozone debt crisis dragged down share prices.
"The eurozone crisis has had a direct bearing on China's stock markets. The poor performance of overseas stock markets weighed down Chinese share prices," said Guangzhou-based investor Peng Bing.
"Luckily, the eurozone has not broken up. Otherwise, my losses would be much greater," he said.
The yuan's significant appreciation against the euro, despite being a nightmare for exporters, has been welcomed by those who study or travel in eurozone countries.
Zhai Xiaoping, chairman of Guangzhou Yingsaide Information Consulting Co., an overseas study consultancy group, said many parents who originally planned to send their children to study in the U.S. are considering alternatives in Europe, as the sharp decline of euro against the yuan will bring a corresponding decrease in overseas expenses.
The declining euro has also encouraged more Chinese to travel to the region.
Cheng Bei, a teacher at Beijing's Communication University of China who stayed in Europe for half a year in 2009, plans to revisit Europe this summer.
"Many European tourism agencies have offered promotions during the crisis, something that could not be expected three years ago," Cheng said.
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