09-Mar-06
RMB currency revaluation hits South China exports.

Hong Kong, March 09, 2006 - A recent Fusion Consulting survey of manufacturers in South China's Pearl River Delta (PRD) region found that the RMB revaluation in mid 2005 impacted the export competitiveness of 40% of the companies interviewed. Three-quarters of those affected suffered a decrease in profits, and the remainder reported drops in export volumes.

A few interesting findings from the survey include:

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

Should the People's Bank of China implement further RMB revaluation of up to 8%, more than half the manufacturers in South China would expect to suffer a decline in export competitiveness, particularly due to raw material and shipping costs.

"On the face of it, a significant number of South China's exporters have lost out as a result of the revaluation." said Ms. Jennifer Ding, head of Fusion Consulting's Shanghai office. "But eventually this should work in Chinese exporters' favour, because it has actually stimulated companies which may have been relying too much on their cost advantage to pay more attention to areas like technology, quality and marketing strategy, making them more competitive in the long term."

"This is a move in the right direction for exporters in Southeast Asia, who have been struggling against low-cost competition and increasing quality of exports from South China in recent years. At the same time, companies in locations like Singapore and Malaysia who rely on Chinese components, such as electronics manufacturers, are having to deal with an increase in their cost base." said Mr. Peter Read, Director of Fusion Consulting in Singapore.

"As a cargo transshipment hub for South China, Hong Kong will suffer some knockon effect from the RMB revaluation." said Ms. Marine Mallinson, Director of Fusion Consulting in Hong Kong. "However, most of the impact has been absorbed by the mainland exporters, which is good for Hong Kong."

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

For more information, please contact Fusion Consulting at

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