The Renminbi and China Manufacturing
On July 21, 2005, the Renminbi’s(RMB) peg to the U.S. Dollar was removed. The RMB now fluctuates to a managed floating rate based on market supply and demand with connection to a combination of other foreign currencies. Once the peg was removed, RMB revalued to 8.11 to every USD. Since then, the RMB has continuously strengthened against the dollar, now trading at around 6.85 RMB per USD.
The more the dollar weakens, and the more the RMB strengthens, the more expensive China Manufacturing becomes for U.S. companies. The United States has continuously reaped the rewards of cheaper manufacturing costs in China, but if this trend continues, this market advantage will not be as great as it is today. Many talk about the need to bring some of this manufacturing back to the U.S., but we absolutely cannot compete with Chinese manufacturing costs right now. We must take advantage of China manufacturing while we still can. The manufacturing cost in China has a great effect on the price of goods in the U.S. The USD to RMB exchange rate is something that we must always keep a close eye on.
Tags: China Manufacturing
September 30th, 2008 at 1:51 pm
Right now Washington is killing the value of the dollar. The whole idea to bail out all of the banks that have made bad decisions is only costing the American people more money. It is also hurting China manufacturing due to the exchange rate. I figure that in the last 18 month China manufacturing prices have increased 28%. That is ridiculous. Maybe if I buy to much inventory from China the government will come bail me out and buy my bad assets??? In the end it is greedy politicians that want more power and more money. Every time that we are in an economic crisis the government gets more power.
November 3rd, 2008 at 4:25 pm
Due to the downturn in the global economy and the many uncertainties, companies find it difficult to survive. Not only is this affecting US and European companies, many Chinese companies are going under due to the vast decrease in Global trade. I believe that in every situation there are opportunities to make money. Not only are the Chinese more willing to negotiate, the shipping companies are struggling to fill containers. Therefore, shipping companies are also more willing to negotiate favorable shipping and logistic rates. I can’t think of a better time to have products manufactured in China than today!