Yuan's Gains May Slow Auto Exports from China

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China's decision to allow greater exchange-rate flexibility may slow plans to export vehicles from the nation, including those manufactured by Toyota Motor (TM) and Honda Motor (HMC). That's because the currency move will make Chinese goods more expensive in other markets.

In a statement last week, China's central bank said it would allow the yuan greater flexibility, signaling an end to its two-year-old policy of pegging the currency to the U.S. dollar. The move pushed the yuan higher in afternoon trading in Hong Kong on Monday, up nearly 0.4% to $6.80 a dollar, Bloomberg News reported.

The rise in the yuan's value will also help tame Chinese inflation, possibly reducing workers' wage demands. Suppliers to Honda and Toyota were recently forced to raise wages to end labor unrest at the companies' factories. Strikes at the plants and unrest at tech manufacturing giant Foxconn signal that China's burgeoning labor movement is strengthening as workers seek higher wages, better working conditions and meaningful respect for labor laws.

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