Late in the day, the dollar was at 6.9913 yuan on the over-the-counter market, after dipping to an all-time low of 6.9907. It closed at 7.0017 on Wednesday.
The trading Thursday marked the first time the Chinese currency has ventured below the 7 yuan mark since the government loosened the unit's peg to the dollar in 2005. The yuan has gained about 18 percent since then.
That has made Chinese-made products more expensive overseas, while shrinking the yuan-denominated value of profits from exports.
An acceleration recently in the yuan's gains has been squeezing China-based exporters, including multinationals, at a time when they already are wincing at surging costs for labor, energy and materials.
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"Our costs keep rising and the dollar is falling so we make less money than ever before," said a quality control manager at EI Global, an exporter of small promotional items.
"I heard my boss might even switch away from exports," said the manager, who gave only his surname, Tao.
Beijing limits the yuan to a narrow trading band, contending that restrictions are needed to protect China's developing financial industries.
The United States wants the yuan to appreciate faster, and some American lawmakers are calling for punitive tariffs on Chinese imports. Washington reported a $256.3 billion trade deficit with China last year, its highest on record with any country.
During a visit to Beijing last week, U.S. Treasury Secretary Henry Paulson reiterated calls for Beijing to let the yuan trade more freely. China has been noncommittal, vowing only to keep the yuan steady while moving gradually toward a more open exchange regime.
A stronger yuan makes imports of key commodities like crude oil less costly in local terms. But for some industries, the foreign exchange losses are outstripping the gains.
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![](http://archives.lincolndailynews.com/2008/Jan/02/images/ads/current/st_clara_lda091007.png) "These are hard times for us," says Wei Yaoting, a textile trader in Shanghai that exports large shipments to the United States.
A typical U.S. order, received last July and delivered in November, was not paid for until February. Over those seven months, the dollar-denominated payment declined in value as the yuan rose.
"We end up swallowing the losses," said Wei, manager of Shanghai HTC Holdings Import & Export Co.
"The more exports, the bigger the losses. We just break even," Wei said. "We're even considering giving up selling to foreign markets that trade in U.S. dollars."
Although most foreign trade, in China and elsewhere, is denominated in dollars, companies increasingly are setting contracts in euros or British pounds to avoid foreign exchange losses, said Ma Xinzheng, deputy chief editor of WebTextiles.com, an industry research group.
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A majority of 1,000 textile traders responding to a survey released this week by WebTextiles said they were setting deals in other currencies.
"Some traders try their best not to deal in U.S. dollars," Ma said.
The reluctance to rely on U.S. dollars is not confined to Chinese traders.
It's also seen in the increasing use of sovereign wealth funds to diversify investments beyond U.S. dollar holdings, billionaire financier George Soros noted in a conference call with journalists Thursday.
"There definitely has been a decline in the status of the dollar as the unquestioned monetary reserve," Soros said.
[Associated Press; By ELAINE KURTENBACH]
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