Chinese Supplier Survey: Yuan Appreciation Will Hurt Exports


We talk so much about how China needs to allow its currency, the renminbi (or yuan) to appreciate.  We talk some about how an appreciation of the renminbi will bring back American jobs (by making Chinese exports relatively more expensive and U.S. exports relative less so) ­– though that is debatable.  But we talk very little, if at all, about the effect of a renminbi appreciation on manufacturers, on workers, and on consumers in China.

It’s a gap I have been lamenting (and the reason we’re working to ask small and medium-sized suppliers in China what their perspectives are on U.S./China trade).  So I was absolutely thrilled this morning to get a press release highlighting the results of a survey of Chinese suppliers.  The bottom line?  “China suppliers are convinced the yuan's appreciation will affect exports negatively, even if the currency strengthens only 2 percent against the US dollar.”  (It has already strengthened about that much since the summer.)

According to the survey (which is available for free here):

Almost 70 percent of exporters project a decrease in orders if the yuan strengthens.  60 percent of survey respondents expect some decrease in export orders, while 8 percent believe sales will be hit significantly because of a stronger yuan.

Source: Global Sources

More than one-third of suppliers said they expect overseas shipments to begin declining when the yuan strengthens by at least two percent. Another 32 percent believe a three percent rise will trigger a slide in sales.

Source: Global Sources

Increasing export prices is the main measure suppliers said they will take to cope with a stronger yuan. A few companies have even started quoting prices based on a 6.6 exchange rate.

Source: Global Sources

The yuan's appreciation is a bigger challenge for suppliers in the well-established manufacturing bases along the Pearl and Yangtze River Delta regions – areas with many factories offering identical designs at similar price points, pressing suppliers to keep prices low.

Suppliers, we want to hear from you!  What are your plans for dealing with an appreciation of the renminbi?  What about those of you U.S. manufacturers – how will you deal with a rise if the relative cost of Chinese exports?  Share your comment below. (If you haven’t yet registered, it’s easy, quick and free – go to http://futureofuschinatrade.com/user.)

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