Update on China Economics: Orders, RMB & figures…

Chinese manufacturers are becoming overloaded with orders as retailers and wholesalers embark on an inventory adjustment to benefit from the pick up in the consumer markets. This is leading to increasing lead times for new orders and adding to structural price pressures that are already evident in the global economy (raw material prices, shipping) and domestically in China (labour costs, utilities, regulations etc). There is also an increasing risk of outsourcing as a result, so understanding what your vendors are doing is important for quality control. Remember, that suppliers are increasingly moving into a position of power at the negotiating table as a result.

Interesting to note that China’s exports rose 48.5% in May, the largest growth in 6 years. Also, producer prices at the factory gate rose by a faster than expected 7.1% in May and 5.9% over the January to May period.

Politically, US Lawmakers said on the 9th June that they will be launching legislative action in two weeks to punish China for refusing to revalue its currency. This is supposedly as a result of President Barack Obama’s administration not being able to push the Chinese leadership to let the yuan appreciate to reflect market rates.

Should this indeed happen, or a trade war ensues, the people that will most likely be impacted by any tariffs imposed on the imports of Chinese goods to the US, will be the US consumer and to a large extent US retailers and businesses.