"We expect to produce more new and improved goods in the future, so that can lessen side affects caused by the change," he said.

The pain should be concentrated in export industries, with little impact on U.S. consumers or China's broader economy, because Beijing is restraining the speed of the yuan's rise, said Andy Rothman, chief China strategist for investment bank CLSA Asia-Pacific Markets.

"I don't think the impact on most Chinese companies will be that significant," Rothman said.

Beijing has given no sign it will slow the yuan's rise, despite the possible threat to employment at a time when the government needs to create jobs for a growing work force and millions of people laid off in the overhaul of state industry.

"When they started out on this process, they knew that some people would be hurt," said Rothman. "If they can see the results are necessary to put the economy on a sounder footing long-term, then they can deal with the pain."

A more muscular yuan also helps the large segment of China's export industries that rely on foreign raw materials.

Many manufacturers assemble imported components, supplying little more than labor and adding just 20 percent to 30 percent of the value of air conditioners, sports equipment and other goods, experts say.

And some Chinese industries are enjoying a windfall.

Oil refiners are racking up fat profits on lower costs for imported crude. Airlines are seeing the cost of Boeing Co. and Airbus Industrie jetliners fall. Banks are richer as the value of their Chinese assets climbs in dollar terms. Companies that invest abroad are paying less for stocks and other assets.

But costs are rising for those that use Chinese materials.

The Anji Henglin Furniture Co. is paying more for wood, plastic and other materials, said Mei Yimin, the director of its foreign trade department. The company, in the southeastern province of Zhejiang, says it was China's 11th-biggest furniture exporter last year with sales of $26 million.

"It is even worse that the appreciation is taking place bit by bit, which makes it more difficult to negotiate with distributors," Mei said. "If it happened by a big margin overnight, they would have no option but to share the loss."

1

2

3