NZ backs Australia in China dispute

<p>Kia ora,</p><p>Welcome to Monday's Economy Watch where we follow the economic events and trends that affect New Zealand.</p><p>I'm David Chaston and this is the International edition from Interest.co.nz.</p><p>Today we lead with news New Zealand is backing Australia in its dispute with China over arbitrary tariffs on barley.</p><p>But first, the US dollar is falling against <a href="https://www.chinabankingnews.com/2021/05/28/chinas-state-owned-media-gainsays-calls-for-appreciation-of-the-renminbi/" target="_blank"><strong>a resurgent Chinese yuan</strong></a>, dipping to 6.37 to the US dollar now and back to levels last seen three years ago. The appreciation of the yuan will suppress their trade surpluses but it will also suppress inflationary impulses building quickly in the Chinese economy. To combat the natural instinct to import more, Beijing may have to adjust its opaque border and customs policies if the rush gets too unseemly, but that will be done secretly given its public commitment to its international trade and tariff agreements, including the one with New Zealand.</p><p>Exporters in Guangdong province are facing a new threat. Not only is a rising yuan trouble for them, rising material costs are too, as are shipping costs, and now they face <a href="https://www.yicaiglobal.com/news/guangdong-producers-face-electricity-shortages-as-power-demand-climbs" target="_blank"><strong>electricity rationing</strong></a>. <a href="https://www.caixinglobal.com/2021-05-11/in-depth-why-chinas-electricity-market-overhaul-is-failing-101709718.html" target="_blank"><strong>Demand exceeds supply</strong></a> because many new projects have failed to get started in the region and that may mean more coal-fired production.</p><p>And so far, we are not seeing the price of key industrial commodities like <a href="http://www.dce.com.cn/DCE/Products/Industrial/Iron%20Ore/index.html" target="_blank"><strong>iron ore</strong></a> or <a href="http://www.dce.com.cn/DCE/Products/Industrial/Coking%20Coal/index.html" target="_blank