China's Plan for Yuan May Aid Mexico Manufacturing Sector, Messmacher Says

China’s decision to ease the yuan’s peg against the dollar may bolster the global economic recovery and help Mexico’s export-driven manufacturing industry, said Miguel Messmacher, chief economist at Mexico’s Finance Ministry.

China’s June 19 pledge to make the currency more flexible will help close “global imbalances” between countries with large current account surpluses and countries with large current account deficits, Messmacher said in a telephone interview.

“The announcement is very important from the point of view of these global imbalances,” Messmacher said today. “It could have an effect on our exports.”

The yuan rose the most in five years yesterday after the central bank said it would increase the currency’s “flexibility,” scrapping a two-year peg against the dollar aimed at shielding exporters from the global financial crisis.

Mexico’s economy stands to benefit from China’s decision as it may increase manufacturing costs in the Asian country, Morgan Stanley analyst Gray Newman said in a report today. A stronger yuan makes China less attractive as a low-cost manufacturer, which may help Mexico compete as a destination for U.S. manufacturers seeking to reduce expenses, the report said.

To contact the reporter on this story: Jens Erik Gould in Mexico City at jgould9@bloomberg.net

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.