Recently,lots of clients or potentional clients frequently asked me a question like below......

Q: Price of various original materials is going up, what may the problem?

A: USD is going up so fast, RMB down so import for material up. Every material are priced in USD. When USD is up, the materials goes up as well. One reason. I am sure there are other reasons maybe. Supply and demand.

I also know that stainless steel is up, and leather for shoes up too. Maybe because they are imported from overseas, and RMB is down. RMB is going down so fast, these days. Because USD is going up, so all currencies are going down as well, and trade has a RMB outflow problem. Meaning many people are taking their money out of china, to do investment and buy properties overseas. So, it put pressure on RMB. I think RMB will hit 7rmb=1usd, maybe before Chinese new years.

President elected Trump can be a problem for china export, because he wants to protect USA market from Chinese products. Let us see. The one reason he won is because the people and cities where many factories closed because of china voted for him. So, I hope they will not be a trade war, because nobody will be a winner.

The impact of currency appreciation
Q: Is that standards the country's economic power is better if its currency is going up?

A: Yes and no. Currency when up is good for importer, when down is good for exporter. When currency is up, people are richer. For example, my salary is all in USD, when RMB is down I am richer in china, when is up I lose money.

Q: But now the down RMB is not as good as our expectations on export because of our import cost is increased. Nowadays, the whole world is one economic entity, must progress together, I don't think just make yourself is rich, than you are rich. Trump is a businessman; I think he should know "win win " is final win. Hope this bad situation will not last long.

A: I don't 100% agree. You have to look at the cost structure of the product, garment for example, you have 30% of the cost is labor. One the reason the garment is dying is china is because 30 % of the cost of the clothes are labor (China labor is high compare to other countries in Asia) , not raw material. Raw material is only one part of the cost. If USD goes up means raw material price goes up, labor cost goes down, rent cost goes down, fixed cost goes down, etc. It depends on the industry; some industry will suffer, some will gain. But RMB going down is in general good for exporter.

My advice is better to go with a niche market, avoid price war. I work with some suppliers, they have some very special product, or special molds, or special quality. It is impossible to get good  price with them because they know they are the only one, the best with that unique products. Believe it or not, I chase them and they don't chase me, because they have more power than me.