Be Clear on the Currency and Rate in Your Contracts
At the beginning of 2008, SourceJuice published an article titled 4 Reasons Sourcing from China will be More Expensive in 2008 discussing the various reasons to expect costs in China to rise. One of the main points was that the Renminbi (RMB) is appreciating against the US Dollar (USD).
We were again reminded of this by the China Law Blog, with their post Yuan/Dollar Exchange Rates. They also reference an article by CNReviews.com titled RMB appreciation and the emergence of a new Asian reserve currency. While both are good reads in general if you’re interested in currency analysis, the important point from a sourcing perspective is: Specify the Currency and Rate in Your Contract!
Spending time negotiating prices is only one part of the puzzle. As you can see in this 2 year chart from Yahoo Finance, the USD vs. RMB chart is pretty ugly. And many are expecting the USD to fall significantly further.
This creates uncertainty. For example, if you price your goods with the factory in USD, the factory is going to want to raise the price on you when the USD depreciates further. However, if you price the goods in RMB, you’re going to be spending more dollars than you expect, and possibly eroding your profit as a result.
Last 5 posts by The SourceJuice Team
- China VAT Changes List for December 2008 - November 19th, 2008
- Expect More VAT Rebates with the new Economic Stimulus from China - November 15th, 2008
- China VAT Changes for 2008 and 2009 – Rebates and More - October 23rd, 2008
- Paying your Chinese Supplier – Know your payment terms and options in advance - October 5th, 2008
- One Man's Challenge is Another Man's Treasure - Home Building Materials, part 4 - August 25th, 2008
Similar Posts
Comments
One Response to “Be Clear on the Currency and Rate in Your Contracts”
Leave a Reply
-
Stay Informed!
-
Subscribe by RSS Subscribe by RSS in China
-
Recently Written
- China VAT Changes List for December 2008
- Expect More VAT Rebates with the new Economic Stimulus from China
- China VAT Changes for 2008 and 2009 – Rebates and More
- Who is sourcing entire boats in China?
- Paying your Chinese Supplier – Know your payment terms and options in advance
- One Man’s Challenge is Another Man’s Treasure - Home Building Materials, part 4
- Export to China – Selling, rather than Buying, from China
- Supply Chain Insurance May Help Manage Supply Chain Risk
- Data Seizure from Abroad, is your data protected?
- Incoterms Definitions - the basics to the advanced
-
Categories
-
Archives
-
-
About
SourceJuice is here to provide you with on the ground information from China, relevant to your sourcing and product development needs.
Select Your Language
 |  |  |  |  |  |  |
 |  |  |  |  |  |  |
 |  |  |  |  |  |  |
 |  |  |  |  |  |  |
 |  |  |  |
Yes, this is one of the main reason for products cost increasing from China factories. While China manufacturers try their best to save extra cost to keep the advantage of “cheap prices and reasonable quality”