THIS is the "BIG ONE": Chinese exporters shun flagging dollar
If this isn't the "BIG ONE" I would surely love to know what is. Here is the final warning shot across our bow. The USS America is in deep kim-chee now.....JG
Chinese exporters shun flagging dollar
By Robin Kwong in Hong Kong
Published: March 27 2008 22:02 | Last updated: March 27 2008 22:02
Rising numbers of Chinese exporters are shunning the US dollar or devising ways to offset the impact of the falling currency as they confront rising labour and raw material costs at home.
According to Alibaba.com, the online company that matches Chinese suppliers with international buyers, the vast majority of their almost 700,000 Chinese suppliers no longer use dollars to settle non-US transactions to minimise foreign exchange risk.
“They are moving to euros, pounds, Australian dollars or even quoting prices in renminbi,” David Wei, chief executive, told the Financial Times. Moreover, he added, prices quoted in dollars were now often valid for just seven days compared with the 30-60 days common previously.
The dollar has long been the currency of choice for Chinese and other exporters around the world. However, the impact of its recent weakening has led exporters to begin questioning its place as the de facto world currency.
The renminbi, which western governments have long alleged is undervalued, thus giving Chinese exporters an unfair advantage, has appreciated 6.7 per cent against the US dollar in the past six months. Economists expect it to rise 10-15 per cent against the dollar in 2008.
Quanzhou Leething Garment & Knitting, a Chinese men’s underwear factory, said it had started encouraging clients to pay in euros instead of dollars in November. While the Chinese currency has appreciated against its US counterpart in recent months, it has moved little against the euro.
Other companies have taken more unusual approaches, such as setting their own exchange rates and therefore in effect raising prices.
Xiao Zheng, chairman of Dongguan City Shima Toys in southern China, said its price quotations were valid for three months but were calculated based on an exchange rate of Rmb6.6 to the dollar.
With the official exchange rate at Rmb7.01 to the dollar on Thursday, this in effect raised prices 5.8 per cent.
“We are thinking about renewing our quotations every other month and we are also going to offer quotations in euros very soon,” said Mr Xiao.
William Fung, managing director of Li & Fung, a global supply chain company, said international buyers would have to accept higher export prices from China, especially for goods such as toys that are largely made only in the country.