Mar-06
Further RMB currency revaluation will hit Chinese exports

On July 21st, 2005, China announced the RMB currency exchange rate against the US dollar would be changed to RMB8.11, effectively revaluing the currency by 2%.

A recent Fusion Consulting survey of manufacturers in the Pearl River Delta (PRD) region found that over half the companies said the revaluation had no impact on the competitiveness of their exports. Slightly over a third of the manufacturers said it had weakened their profits or export volume.

To regain competitiveness, some of these manufacturers (28%) have implemented short-term approaches such as increasing price or cost-cutting. Over 40% of the manufacturers have adopted more sustainable strategies including: improving technology, quality and efficiency; expanding to new markets; and developing new products. Interestingly, around 30% of the companies affected have taken no corrective measures, preferring to adopt a wait-and-see attitude.

Should the People's Bank of China decide on a further RMB revaluation up to half the exporters in South China expect to suffer a decline in competitiveness, particularly due to raw material and shipping costs.

Although we do not anticipate a revaluation of as much as 8% in the near future, Chinese manufacturers and their business partners will need to be prepared for the next stage in the country's economic development, during which pressure to liberalise monetary policy is expected to increase.

Visit our Industrial & logistics practice

About Fusion Consulting
Fusion Consulting is a business intelligence consultancy providing strategic advice on Asia-Pacific markets. With offices in Shanghai, Singapore and Hong Kong, and a network of 400 freelance industry consultants in 16 countries, the company conducts custom research and consulting to help clients understand their markets, compete more effectively and grow into new areas of opportunity. www.fusionc.com

Back to Industry bulletins