Fri, Nov 19, 2004 - Page 11 News List

Stronger renminbi worse than strong NT, analysts say

CNA , TAIPEI

An appreciating Chinese yuan will hurt Taiwan's information-technology business more than a stronger New Taiwan dollar, industry analysts said yesterday.

Despite the fact that the local currency has surged to an almost four-year high against the US dollar, the analysts said that a stronger yuan will do greater damage to Taiwanese computer companies based in China, as a vast majority of them are contract makers for big multinationals.

Taiwanese computer companies based in China will face a fierce war to defend their gross earnings should the yuan gain value as expected next year, they said.

According to a recent survey by the Professional Management Association in Taipei, 60 percent of the Taiwanese executives working in China believe that the yuan will rise in value next year, with nearly 50 percent holding the opinion that such a development would hurt their profits.

Most of them have turned from "optimistic" to "cautiously optimistic" in terms of their business prospects in the coming three years, the survey found.

As about 80 percent of Taiwan's computer firms have relocated their production lines to China in search of lower costs, a strong NT dollar will only have a limited impact on their knowledge-based research and development centers at home, analysts said.

However, a strong renminbi will levy a robust operating cost on export-oriented Taiwanese contractors operating in China, making their efforts to seek cheaper production in vain, according to an analyst with the Taipei-based Topology Research Institute.

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