China's MOFCOM calls for slower yuan rise

Tag: China shoes export

China's Ministry of Commerce has made a formal proposal to slow the pace of yuan appreciation and increase export tax rebates to prevent a sharp drop in its exports, an official source said on Monday.

The recommendations, made in a report to the State Council, or cabinet, followed a 12 percent decline in China's trade surplus in the first half from a year earlier, fuelling worries in Beijing about an economic slowdown.

The cabinet last week asked the Ministry of Commerce (MOFCOM) to report on China's first-half trade performance and make policy suggestions, an official source told Reuters.

MOFCOM has a powerful voice in Beijing but it is just one of several organisations that shape final policy; other parts of the government, notably the central bank, have pushed harder for yuan appreciation.

In the report, MOFCOM highlighted the challenges faced by Chinese exporters, including a stronger yuan, increasing input costs and the constricting effects of tight monetary policy.

"MOFCOM pleaded that China maintain a stable foreign exchange rate and appropriately slow the pace of yuan appreciation in order to give exporters more time to adjust," the source said.

The yuan climbed 6.6 percent against the dollar in the first half, the fastest clip since the currency was depegged from the dollar three years ago.

The ministry also suggested that tax rebates be raised for labour-intensive exporters, such as textile, garment, toy and shoe manufacturers, the source added.