Jan 28, 2013

In November, Xi Jinping was elected as the new leader of China’s Communist Party, replacing Hu Jintao. His first moves included denouncing corruption and making a visit to the special economic zone in Shenzhen, which some see as a sign to show support for market orientated economic policies. Corruption is deeply ingrained into the Chinese government system; it will be interesting to see if Xi (pronounced “Shi”) will put action behind his words. Xi Jinping’s daughter attends Harvard, so he is more familiar with Western culture than his predecessors. Hopefully this will bode well for US-China relations.

President Obama recently signed the National Defense Authorization Act, which continues the policy of banning the export of satellites to China. The Chinese are whining about it, but I say good for Obama. The last thing we should do is give them one of our satellites to copy.

Ever since the U.S. Government went on its “Quantitative Easing until the Printing Press Breaks” program, the dollar has been dropping against the Yuan. Last summer it had run up to 6.37 to one USD, while today it is 6.23 to 1. My guess is that the U.S. government won’t have the guts to make the spending cuts and/or adjustments in revenue and entitlements needed to come close to balancing the budget, which doesn’t bode well for the U.S. dollar. What it all comes down to is that we’re spending 2.4 trillion dollars a year on entitlements. Another 1.3 trillion goes to running the government, and the military. We’d have to hollow out entitlements by close to 50% to balance the budget, and there are few congressmen who are willing to tell seniors and other recipients of the dole that they’re going to have to take a big cut in their government check. What many don’t realize is that when social security was originally implemented, the life expectancy was such that most wouldn’t live much more than a few years after they retired. Now people are retiring in their 60s (as early as 62) and living off the government for 15-20 years. This is bankrupting us. The U.S. has become an entitlement and debt junkie; it will probably take a bad trip (i.e. economic crisis) before they understand that government can’t pay the way for a large swathe of the population for an extended period of time.

In spite of all the problems in Europe and here at home, the IMF is predicting global economic growth of 3.6% in 2013. The World Trade Organization is predicting growth in world trade of 4.5%. China’s Institute for Economics of the Chinese Academy of Social Sciences estimates that China’s international trade can increase by around 6% this year. In all, the predictions don’t look too bad once you take out Europe (which is only expected to grow by .2%).

Of course, a prediction is just a guess… we never know what twists and turns await.

The Chinese New Year Approaches 

China will celebrate the Chinese New Year (aka Spring Festival) a little later this year. Chinese companies will start shutting down early February and will be closed until at least February 15. Some factories will be closed longer; last year we had one factory that closed for a month. Another issue is there are many workers who are employed at factories on the Eastern Seaboard, which is where most of China’s industry is based, who visit their homes in the center of the country during the holiday. Some of these workers take a month to return, which means factories may not be back to full capacity until the end of February or even early March.

Please keep the above in mind when planning your order delivery times.

The China Blog

I have a blog where I post updates and other information on doing business with China on a weekly basis. Recently I posted a picture of a cobra I encountered during a visit this year to China. If you want to sign up to receive notifications of blog posts, go to the Blog Home Page and sign up at the signup box at the top right of the page.

The Exchange Rate

The dollar has been depreciating recently against the yuan at an accelerated rate. If the decline continues it will soon start to have an effect on prices, although we’re only talking about a percentage point or two at present.

Yuan to the dollar, as of today: 6.23 to 1
Rate when the Yuan was depegged from the dollar on June 19, 2010:  6.82 to 1
Change: .59 (8.6%)

About Us

Since 1991, Global Trade Specialists, Inc. has helped companies of all sizes get their products made in China from manufacturers of quality products. We are an American company who works with three trading groups in China with immediate access to thousands of manufacturing companies. We source most products made from metal, plastic, wood, stone, glass or textiles; from prototype to production. Many of our customers are first time importers; we walk you through the entire process.

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Previous Newsletters:

December 2012: A Trip I’ll Never Forget
November: 4 Principals for Success
October: China in the News
September: Remembering Nixon’s Visit to China
August: Who’s the Bad Guy Here?
July: We’re not in Kansas Anymore

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