Exchange rate fall may impact China-EU trade

According to an announcement released by the China Foreign Exchange Trading Centre, the renminbi exchange rate for one Euro is down to 7.9980 yuan in the interbank foreign exchange market. It is the first time it has fallen below the 8.0 mark integer since June 2002, the International Finance News reported on Thursday.

Analysts believe that if the summit meeting of EU leaders can not reach a consensus on the issue of euro bonds, fiscal austerity and economic growth, the euro may be hit again and continue to drop throughout the year.

Liu Xintao, a teaching staff of the Dalian Commodity Exchange Futures Institute, noted that the euro's further depreciation has a two part impact on China-EU trade.

On one hand, in terms of using the euro as the currency for trade settlement, the depreciation of the euro is bad news for China's exports to Europe, while a good news for European exporters.

On the other hand, the euro's depreciation may also have an effect on those using the US dollar as the currency for trade settlement.

Some Chinese exporters said that, for China, as the euro is not a major settlement currency, the impact on export from China's enterprises will not be very obvious but it is good for its imports, Liu added.

Liu also pointed two paths to stimulate the growth of the euro zone in a short term: printing a large number of bank notes and raising interest rates. However, considering the actual situation of the euro area, demand in the European market is low, with European merchants already decreasing their purchasing power. Therefore, both of the two methods are not realistic options.