By KEITH BRADSHER

HONG KONG - The pain of the European debt crisis is spreading as the plummeting euro makes Chinese companies less competitive in Europe, their largest market, and complicates any move to break the Chinese currency’s peg to the dollar.

Chinese policy makers reached a rough consensus early last month about breaking the dollar peg and letting the currency, the renminbi, rise in value somewhat, according to people close to Chinese currency policy makers. Uncoupling the currencies would make American goods more competitive against Chinese products. But for various reasons, China has not yet put that policy into place.

And in light of the euro’s plummet, such a move could be difficult. Letting the renminbi rise against the dollar would also mean a further increase in the renminbi’s value against the euro, creating even more problems for Chinese exporters to Europe.

The euro has plunged against the renminbi in recent weeks, at one point reaching its lowest level since late 2002.

The steep rise of the renminbi prompted a Commerce Ministry official in Beijing to warn that China’s exports could be threatened.

The official’s comments were the most explicit yet on the implications for China of Europe’s recent financial difficulties. The comments also suggest that even China - the world’s fastestgrowing major economy and increasingly the engine of global growth - is not immune to the crisis that started in Greece and threatens to spread across much of Europe.

“The yuan has risen about 14.5 percent against the euro during the last four months, which will increase cost pressure for Chinese exporters and also have a negative impact on China’s exports to European countries,” Yao Jian, the ministry’s spokesman, said at a news conference in Beijing, according to news services, using another term for China’s currency.

Some economists warn that China may face more problems. The biggest reason Chinese exports plunged early last year was not weakening demand in industrialized countries but a sudden, temporary disappearance of trade finance from Chinese and foreign banks. The availability of trade finance could easily become a serious problem again soon, said Dong Tao, the chief Asia economist at Credit Suisse.

Chinese exporters rely very heavily on bank letters of credit to finance their shipments. The availability of the letters of credit is closely linked to overnight lending rates between banks. When banks have trouble borrowing money themselves they tend to cut sharply the issuance of letters of credit for trade finance.

The banks see that as a quick, easy way to conserve cash without violating the terms of other financial obligations, like established lines of credit for big corporations.

Some Chinese companies are already running into difficulty because of the euro’s fall against the renminbi.

“We have been receiving calls from some European clients who signed contracts with us earlier this month, and they all want to cancel their orders, since the depreciation of the euro has eroded all their margins and then some,” said Elvin Xu, the sales manager of Guangdong Ouyi Electrical Appliance in Zhongshan, China, which makes gas stoves, heaters and water heaters.

“They say they cannot increase the prices at their end to their customers, given intense competition in their marketplace,” Mr. Xu added.

The renminbi is rising along with the dollar against the euro. The Chinese government has continued to intervene heavily in currency markets in recent weeks to prevent the renminbi from rising against the dollar, maintaining an informal peg of 6.827 renminbi to the dollar, the level since July 2008.

Because American companies in particular compete in the Chinese market with European companies in many industries, the euro’s weakness against the renminbi is putting American companies at a disadvantage.

“As the euro continues to decline, they’re going to have some advantages,” said Steve Jennings, the chief marketing officer of BPL Global, a company based in Oregon that manufactures electricity monitoring equipment.

Continued Chinese inaction would antagonize many commercial rivals of China, and could fuel pressures in Washington for Congress to draft trade legislation threatening restrictions on Chinese exports.



The decline of the euro could create problems for Chinese exporters who do business in Europe. The grand opening of a Dior shop in Shanghai. / PHILIPPE LOPEZ/AGENCE FRANCE-PRESSE—GETTY IMAGES