In today’s lines we will see how the appreciation of the yuan affects. And, more specifically, how it can influence China’s hardware import businesses. If we compare Chinese yuan to USD from the previous year, we see that the CNY’s appreciation against the US dollar grows exponentially. What does this translate into terms of export trade?
The increase in the value of the CNY and the fall in exchange rates
According to official data, compared to CNY 7.18 (Chinese Yuan) to USD 1 as of May 2020, the CNY’s appreciation against the US dollar has surpassed 10% in the last 7 months to 6.48 in January 2021. The yuan rose at the end of 2020 by 9%. The country’s economy grew by about 2%, and the forecast for 2021 is 8.2%.
Exports grew in the second half of 2020. And export earnings did not increase as expected. Some of these entrepreneurs even suffered losses due to the increased value of the CNY.
What to expect for 2021? Will the appreciation of the Chinese yuan continue to rise?
We will say that there is no clear consensus on the Chinese yuan and what will happen in 2021 regarding the Chinese economy. But it is worth noting that China, unlike the US and Europe, has managed to move forward despite the crisis. And this without over-compromising its monetary policy. Interest rates have not been lowered, nor debt has been bought massively.
Inflation continues to rise in the Asian giant. The production price index rose 0.5% last November. It has thus increased its acceleration since September 2018.
These are therefore indicators that warn of the possibility for China to change its interest rates upwards this year. A fact that will drive the revaluation of the Chinese yuan and the decline of the trade surplus.
What does the rise of the yuan mean for imports?
Li Keqiang, the Chinese prime minister, said on November 24th that: “China wanted to strike a trade balance and was not looking at all for a surplus.” It is estimated that the country will not try to keep the currency appreciated. The annual lows set in May 2020 made the Chinese yuan more than 9% revalued against the dollar. This gives as a balance of the year that a total of 6% is appreciated against the US currency.
On the other hand, the fall in exchange rates coupled with rising sea freight and high material costs are variables that directly affect and complicate the situation for suppliers when exporting from China.
IBMH’s Quality Control Service
This situation of uncertainty can encourage suppliers to find ways to reduce potential losses. In other words, there may be changes in the quality of the product or raw material.
Thanks to our “on-site” China Quality Management and Control System, IBMH guarantees you the absolute quality of the final product. Our team works closely on:
- Technical inspection of all samples to assess their suitability.
- Inspection at the beginning of production ensuring that the Chinese manufacturer meets the established requirements.
- Monitoring of faults so that, if any, they can be resolved in advance.
- Inspection at the end of production by performing random sampling.
To reduce the risk in your imports of furniture hardware and construction from China and to control the quality up close, do not hesitate to contact us. We are the partner you need to ensure the success and profitability of all your hardware imports. Contact us today!