Chinatown, New York City – While the U.S. continues to pressure China on its currency revaluation, which became extremely desperate last week by the House’s passage of the bill on tariff imposition, it also casts a shadow over one community in its own land: Chinatown. The neighborhood’s economy largely relies upon cheap imported goods from mainland China. Having been stricken by the dual impacts of domestic economic recession and sustained yuan appreciation since 2005, businessmen in Chinatown are more hesitant rather than optimistic when confronted with the government’s ambition to bolster the economy by up-valuating the Chinese currency.
“We have much less customers now. The business has been in a downturn for four or five years,” said Lisheng Wang, owner of the H.L.C. Trading Company which sells small electric appliances and CDs, who like all the business owners for this story spoke in Mandarin Chinese. Half of the company’s commodities are imported from China. Despite the Obama adminstration’s optimism that the yuan appreciate would adjust trade imbalances and facilitate economic, because of the high percentage of imports from China, Wang, and other business owners in Chinatown, are doubtful their businesses would benefit.
“No Chinese American here would want the yuan to rise,” said Leo Zhu who works at a cell phone repair store located at 88 East Broadway. “But you can do nothing about it.” Currently the store chooses to endure the reduction of operating profits instead of raising its service price because the increased cost of imported materials is still not very high. “But we’ll have to raise prices if yuan continues to go up, even at the cost of losing some customers,” added Zhu.
Since July 21, 2005 when the Chinese government announced to shift yuan’s peg to dollar to a basket of currencies, the dollar-yuan exchange rate has risen from 1: 8.11 to 1: 6.72 today. This year, the yuan went through an appreciation of 2.1 percent until now. During the past five years, many shops in Chinatown, especially those selling food, clothing, or building materials, all that tend to buy their stock directly from China, have been hurt by the rising exchange rate. In the case of Chinese food businesses, although many have started purchasing more goods from local farmlands, including those in New Jersey, many materials like dry goods and Chinese medicinal materials are still being bought from China. It’s a similar situation with most basic building materials. The negative impact on local Chinese businesses is very likely to continue as the yuan is considered by countries suffering from trade deficit still undervalued by approximately 20 percent.
John Yu, the vice president of New York Chinese Business Association and the president of Kinyu Realty Corporation, said that due to the higher prices of imported goods from China, business people are starting to buy from other countries. “Take clothing for example, many now are imported from Thailand, Cambodia, Vietnam,” said Mr. Yu. “But manufacturing in these countries has developed for only ten years, and cannot replace China’s position. The profits of garment industry went down by probably 50 percent in these five years.”
Nevertheless, as a real estate broker himself, Mr. Yu actually gained some benefits from Chinese currency appreciation. “Chinese people become richer so that many come to buy houses in the U.S.,” he said. “A Chinese businessman bought a unit around Lincoln Center at the price of over 33 million US dollars in March this year.” Still, he added that the benefit is tiny compared to the lost.
As for the future, Mr. Yu is not that pessimistic. He believes that the pace of further appreciation would not be so rapid because of China’s resistant attitudes. So Chinatown has time to adapt itself.
“It’s going to be worse, but not extremely bad,” said Caiqin Lin, a person in charge of the 99 Cents Plus Chinese supermarket. “You have to embrace it and deal with it as everyone does, or don’t do the business.”