Damage from yuan revaluation likely to be minor on Japanese business

TOKYO (AP) - The economic fallout from China's scrapping the dollar peg on its currency is likely to be small and most Japanese companies plan to continue to expand business there, according to a survey by a major newspaper. 

More than half of the 72 Japanese companies responding to a survey by the Nihon Keizai Shimbun published Saturday said they will beef up their existing marketing and production efforts in China, while none plan to reduce operations because of the yuan's revaluation. 

China decided last Thursday to loosen the yuan's peg on the dollar, deciding instead to link its value to a collection of currencies. Beijing also allowed the yuan to appreciate about 2 percent against the dollar. 

Many analysts predict the yuan will appreciate over time and lift the yen with it - which could hurt Japanese exporters because that erodes their earnings in the United States and Europe when repatriated to Japan. 

However, a stronger yuan could also benefit Japanese exporters because it blunts the competitiveness of Chinese exports. 

Japan and China have a complex trade relationship, and a rising yuan would likely affect different businesses in different ways. 

Some businesses, like discount stores, import products from China to sell in Japan, but other companies have set up plants in China, where they produce cars almost entirely for the Chinese market. 

Many also manufacture products in China to export them to the United States and other nations. 

China remains attractive not only as a low-cost production base but also as a giant market, Japanese business executives say. 

There may even be new opportunities as Chinese purchasing power increases on the stronger yuan and consumers' interest in goods imported from Japan picks up, some say. 

"China is a growth market, and we'll mainly expand our cellular phone and systems-configuration operations,'' NEC Corp. 

President Akinobu Kanasugi was quoted as saying in the Nikkei. 

Itaru Koeda, chairman of the Japan Automobile Manufacturers Association, which represents Japan's automakers, said Monday that the impact on the Japanese auto industry will be negligible, according to JAMA spokesman Satoshi Honda. 

Koeda welcomed the move as a sign that the Chinese economy is maturing and growing more international, Honda said. 

Still, the Nikkei survey found that 24 companies are thinking of expanding their Asian investments to other nations such as India and Vietnam because of the risks of concentrating too much on just China. 

"Rather than exclusively focusing on China, we're seeking a balanced overseas expansion,'' said Tokuichi Okaya, president of steel wholesaler Okaya & Co. - AP

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