What the depreciating RMB means for your business.

rmb usd

For the first time since I can remember, the RMB (AKA Chinese Yuan or CNY) didn’tappreciate today.

For the past 5 years the trend is pretty obvious. Just look at the chart below. Beijing has kept the maximum daily allowable appreciation amount to a minimum, so there were no big jumps, but day by day, the currency got stronger and stronger.

rmb usd

But things are different now.

Yes, in the past there have been times when it didn’t move much- like when Beijing held the exchange rate in a very tight band during the Global Financial Crisis. But today is the first time in my memory, where the headlines (here are pointing out that the RMB actually depreciated in some markets.

Domestic and external conditions for yuan appreciation have changed dramatically compared with the past 10 years, leaving more room for two-way yuan fluctuation, instead of only appreciation.

What is the central government saying?

The real effective exchange rate of Renminbi may have reached its equilibrious level after rising by 30 percent since China launched the exchange rate reform in 2005, Chinese Premier Wen Jiabao said Wednesday.

Why should I care?

As buyers, a weak RMB is good for us, so let’s keep our fingers crossed that the RMB stays where it is or gets slightly weaker in the short and medium term.

Wishing you successful China sourcing!

References/Related:

Central government to bring down costs of logistics. Good news for sourcing industry.

Heavy hitters weigh in on future of China Sourcing

What lawn mowing methods tell us about the costs of labor in China

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