The Yuan is Depegged
On June 19, referencing the “global economic recovery,” the People’s Bank of China announced that it was depegging the Yuan from the dollar. The outcome of this shift in policy is that prices for product imported from China will be affected by the exchange rate.
However, the rise of the Yuan will look more like a turtle trudging an incline than a rabbit off to the races. Using government-speak, the P.B.C. said China would continue as a “managed floating exchange rate regime based on market supply and demand to a basket of currencies.”
Translation: the Chinese have an iron-fisted grip on how much the Yuan can appreciate. How tight-fisted are they? The Yuan cannot fluctuate more than three tenths of one percent against the dollar in a given day.
Economists are estimating the yuan will strengthen two to five percent by the end of this year.
(One of my suppliers in China thinks the Yuan will appreciate 2% in the next few months alone.) On June 19, the exchange rate was 6.82 yuan to the dollar. Today, it is 6.77 to 1. We’ll keep you updated on the status of the exchange rate in future newsletters.
Will Chinese Companies Sell My Product to Others?
New customers ask this question often, and not without reason. The Chinese government’s lax enforcement of trademarks, copyrights and patents (especially from companies outside of China) has earned the country a well-deserved reputation as the Piracy King of the World. There are more pirated copies of Microsoft’s Windows Software in China than legitimate ones, and users there can download copies of other proprietary software worth thousands of dollars for free.
There is a two part answer to this question.
First, a Chinese factory could sell your product to other companies. Without a patent in China (which would be hard to enforce) there is nothing that would stop a factory from selling your product there if they wanted to. If you don’t have a patent or trademark in the U.S., the U.K., European countries, Australia or Canada, Chinese companies could export your product to these countries as well.
But, even though they could sell your product to others, will they?
- Most Chinese manufacturers make production runs to order; they won’t tie up financial resources in inventory. Since you are the best marketing resource in your country for your product, their first hope is to do business with you.
- Many products that sell well in North America or Europe are not appropriate for the Chinese market. Chinese factories won’t have the means to sell your product in their country, or the connections to sell it in yours.
- If your product sells to a small niche market, the chances of them spending the time and resources to go around you are even less.
- If you’re placing consistent, substantial orders for your product, the factory will not want to risk losing your business. Good customers have leverage in the game.
- In the past 10 years, there are only two situations I know of where the Chinese sold my customer’s product to another party. In the first, they shipped the product to Europe, but did not sell it to the States as my American customer had a U.S. design trademark. For the second, the customer didn’t pay for the product, which forced the supplier in China to sell the inventory in their domestic market (they didn’t export it to the U.S.)
- In fact, there are many Chinese factories that honor their exclusive manufacturing agreements. Apple’s products are one example. We’ve never seen an Ipod or Iphone sold in the U.S. in an off-brand by Apple’s factories, undoubtedly, because Apple has an exclusive agreement with their Chinese suppliers, and they dare not risk losing a good customer.
So, a Chinese factory could sell your product to others, but, chances are that they probably won’t, at least, not in your home country. Ultimately, your best protection is a patent, trademark, or copyright of your product. When this isn’t possible, the next best thing is to have the factory sign an exclusive manufacturing agreement.
Want a Rosewood Pen?
For years, we’ve been sourcing wood products from a large factory in China that does fantastic work. Their quality is second to none, and they work with a variety of materials, including rosewood, walnut, oak, and maple.
To show you an example of their work, I’d like to send you a free sample of a rosewood pen that they make. Just reply to this email with the address where you want it sent, and it’ll be on the way. This pen is a great promotional item; custom logos, pictures or names can be laser engraved on the barrel. This factory makes many other items for office and home use; they do custom work as well.
We Pay $500.00 for Referrals
For any new customers you send our way who place an order, we will pay you a $500.00 referral fee. Checks are sent out after we are paid for our commission. Please inform us of your involvement within one week of your referral’s original contact with us so we know who to attribute the source to.
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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