Low RMB Means Great Deals For Resellers

Author xlxmarketing 24.2.2009. | 19:32

It doesn’t take a rocket scientist to see that Chinese bosses are not ‘floating’ the RMB as fast as the US would like

The old specter of the RMB rate has raised its head again as of late. Headed by the US, Western countries are urging Chinese financial bosses to do more to raise the value of the RMB and unhook it from the USD.

A move, they feel would help cancel out an unfair advantage Chinese electronics and other exports have over other countries.

But, given current economic conditions is this really the best option for China and what impact will this have on resellers sourcing from China or people using a Chinese dropshipping service?

China’s currency, the RMB (danwei.org/china_information/china_currency_trade_revaluati.php), have long been the point of conjecture and the cause of much butting of heads between finanicial and trade heads with the USD RMB rate being a particularly sore point between the US and China.

The USD RMB rate through the years…

2001 8.26

2003 8.27

2005 8.27

2007 7.75

2009 6.83

Right up to July 2005 the USD RMB exchange was locked to the rate of 8.28 RMB in one USD when Chinese financial bosses unpegged the RMB from the USD (kind of), instead setting the rate based on a basket of currencies.

Even though the RMB has been increasing in value against the USD, Euro and other global currencies many countries’ commentators, particularly those in the US, say that it hasn’t come up enough and it is this that is harming the US economy so much as it makes the Chinese products so attractive.

So are US political leaders right? Is the RMB rate, are exporters paying too much for USD in RMB?

If Chinese financial heads were reluctant to play around with the RMB rate against other currencies it will take some major international pressure now as leaders look to the mainstay of exports to prop up the economy and maintain internal social order.

Despite Chinese officials best efforts this is still China’s main source of income (picture by Dodoïste [commons.wikimedia.org/wiki/User:Dodo%C3%AFste], source Wikipedia [en.wikipedia.org/wiki/File:Jnpt.jpg])

According to Asia Sentinel (asiasentinel.com/index.php?option=com_content&task=view&id=1665&Itemid=32) imports fell by 16 percent from December to January, indicating hard times ahead for the manufacturing industries, further reflected by the unemployment rate.

One commentator (asiasentinel.com/index.php?option=com_content&task=view&id=1630&Itemid=32&limit=1&limitstart=0) puts the unemployment rate at a potential 24 million people for zero percent GDP growth in 12 months.

This would make the ‘Oakies’ migration during the 1929 depression look like a small town parade and this is something the authorities would want to avoid at all costs.

So it is not surprising then that Chinese authorities don’t want to do too much to lift the exchange rate which is keeping their exporters afloat… and why many commentators with a little experience in the Asian region are warning against such a move.

That’s not to say some deregulation isn’t going on in the RMB arena though.

In December, Beijing allowed (asiasentinel.com/index.php?option=com_content&task=view&id=1636&Itemid=32) manufacturers and traders in Hong Kong, Guangdong and the Yangtze River Delta (Which includes Shanghai and surrounding cities) the ability to take the Yuan outside of China.

They also let Yunnan and Guangxi use the yuan when trading with Laos, Burma, Vietnam and Thailand.

So what does this all mean for resellers and people importing goods from China?

In six words, cheaper goods and more trade options.

Exporters are trying their hardest to retain and gain customers in the current global climate and this results in better deals for people with the cash to buy.

People sourcing wholesale electronics and those dropshipping consumer electronics like unlocked cell phones and green gadgets may have already noticed prices coming down and will probably see some more savings very soon.

They are also going to see more options from China cross the oceans as exporters use the recently released RMB trade constraint to cut down transaction costs and get more of their products overseas.

So, while the end customers might be tight on the ground it’s still a very good move to get in contact with your wholesale dropship company or visiting the website of your China wholesale firm to take advantage of low stock prices.

China Business,China Wholesale

Author xlxmarketing 24.2.2009. | 19:32
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