Weaker yuan against euro boosts Chinese export competitiveness, EU chamber says

Dec 10 (Reuters) - The yuan's decline against the euro this year has helped boost the competitiveness of Chinese exports in the European market, a lobbying group said on Wednesday.

The European Union Chamber of Commerce in China said Beijing has been seeking to offset its supply-and-demand imbalance by maintaining an export-driven growth strategy, with the European Union being one of the main destinations for Chinese goods.

"This has already resulted in some industries that are vital to European economic security coming under pressure from low-priced quality products, supported by a weak Chinese exchange rate and industrial policy measures," said Jens Eskelund, the chamber's president, in a report released on Wednesday.

The yuan fell to a 10-year low against the euro EURCNY=CFXS earlier this year before stabilising at around 8.22 and it looked set for the biggest annual decline in more than two decades.

Much of the weakness has translated to the yuan's falling value against its currency basket, as measured by the CFETS basket index .CFSCNYI, to about 3.7% so far this year.

The release of the report came after China's trade surplus topped $1 trillion for the first time as manufacturers seeking to avoid President Donald Trump's tariffs on Chinese goods shipped more to non-U.S. markets in November, with exports to Europe, Australia and Southeast Asia surging.

Deflationary pressure was still persistent, with underlying trends suggesting domestic demand remained weak and was unlikely to recover in the near term.

"Inflation in China is likely to remain lower than in Europe or the U.S. for the foreseeable future, leading to constant downward pressure on the real exchange rate of the yuan," said Volkmar Baur, an FX and commodity analyst at Commerzbank.

"This should normally be offset by a nominal appreciation of the yuan, which would lead to a lower USD-CNY exchange rate. The People's Bank of China also seems to be taking this to heart at the moment."

The yuan has gained about 3.2% against the dollar CNY=CFXS and is on course for its best year since 2020.

The steady appreciation of the tightly managed currency against the greenback has reignited speculation that Beijing is renewing its campaign to drive the yuan's global use, market watchers say.