- Image by upton via Flickr
Supply Chain Digest recently ran a feature highlighting an academic paper that suggests China should let the RMB appreciate 10% relative to the dollar. The story suggests that “if such a move were to happen, it would effectively increase the price of Chinese imports to the US by 10%, in some cases eliminating the savings attained from offshoring there. However, suppliers in China could reduce prices to offset the currency swing, perhaps aided by government subsidies.” Today the RMB (or Yuan, as it’s also called) only partially floats on the open market (it’s like a buoy that floats up and down with the tide while remaining firmly anchored to the floor of the Chinese Central Authority economic ocean).
For companies that do significant export business with China, further calls for a more freely floating RMB should signal the alarm that the savings from China sourcing has the potential to continually erode, year over year…
