The Chinese threat

The Czech crown and some local producers could get a boost if political pressure from the U.S. forces China to revalue its currency, the yuan. U.S. politicians and businesses claim that an artificially weak yuan is ruining America's manufacturing base, and the head of the European Central Bank, Wim Duisenberg, chimed in by saying world growth is at risk due to certain Asian currency policies. Analyst Miroslav Brabec of Raiffeisenbank said that an appreciation of the yuan vs. the dollar would take some pressure off the crown by reducing the CR's growing trade deficit with China. From Aug. 2002 to July 2003, the CR's trade deficit was Kč 69bn. The deficit with China alone, Brabec noted, was Kč 60bn. Cheap Chinese imports are increasingly a threat to traditional Czech manufacturers, he added. So far, though, few in the CR have taken the issue seriously.