Toyota and Honda suppliers sacrificed earnings in China by raising wages to end strikes, and the government’s decision to allow greater exchange-rate flexibility may slow plans to export vehicles from the nation as the currency appreciates.
China’s central bank will allow the yuan more flexibility, it said in a statement on June 19, signalling an end to the currency’s two-year-old peg to the dollar. The currency climbed the most in 20 months against the dollar and forwards jumped.
The looser currency stance comes “on the back of all these moves to endorse the wage increases,” Goldman Sachs Chief Global Economist Jim O’Neill said in a Bloomberg Television interview yesterday. “It’s all part of moving to the consumer, more domestic-demand-driven economy,” he added.
