By Li Hongmei

China is feeling the impact of allowing the renminbi to strengthen while Japan devalues the yen, and exporters are hurting, according to the Shanghai-based First Financial Daily.

The median trading price of the renminbi against the US dollar set a new high of 6.1998 on May 21. The US dollar has also risen by over 30% against the yen and surpassed the 120 yen level since the end of 2011.

The situation has led to increasing bank deposits in foreign currencies in China, forcing the central People's Bank of China to release more renminbi into the market. As the M2 money supply is expected to surge to 105 trillion yuan (US$17.12 trillion) in May from March's 100 trillion yuan (US$16.3 trillion), the rate of increase is much faster than Beijing's target of 13% set at the beginning of this year.

Recent trade figures bore out the forecast of a foreign financial institution, which estimated that the sharp decline of the yen against the renminbi would cost China at least 4% of its exports.

During the first four months of the year, Jiangsu province posted a 3.7% year-on-year decline in exports to Japan, a major export market for the eastern province, the newspaper noted.

"The plunge of the Japanese yen will have great impact on products of labor-intensive industries," said an expert familiar with Jiangsu's foreign trade.

Japanese prime minister Shinzo Abe's plan to depreciate the yen is aimed at rejuvenating the country's economy, which has been stagnant for two decades, by stimulating inflation and boosting exports.

Although it will take time to examine if the policy to depreciate the currency is a good way to revive Japan's competitiveness, Chinese companies have felt the effects of cheaper Japanese imports. Deng Weiming, an executive with Panda Electronics Group, said the prime cost of a 32-inch plasma TV from Japan has dropped from US$130 to US$100 per unit.