The Rising Chinese Yuan – What It Means for Your Small Business
by Leeia Ladipoh on April 28th, 2008
If you run a retail business, you may be very well aware of how the rising value of the Chinese Yuan is affecting your bottom line. Many products for sale on the U.S. retail market are purchased from China. It used to be that purchasing these items was always a great deal, because the U.S. dollar was strong while the Chinese Yuan was weak.
However, times have changed.
The Yuan has been creeping up over the past year and is continuing to gain strength, while the Dollar is struggling in the world market.
For retailers, the impact is crystal-clear. It shows up on their invoices. As the Yuan gets stronger, the items they purchase from China are costing more. In some cases, prices have doubled over what they were just a year ago.
For larger companies, while this is an annoyance, they can spread out the impact throughout their products and company sectors. For small businesses, this is not as easily accomplished.
So what is a small business to do?
Measure the Impact
First, take an honest look at what impact the rising Yuan is having on your business. If you regularly manufacture items in China or order products for retail sale, look closely at the increase you have seen in the past year.
Now, think about what will happen to your bottom line if things continue on this track for awhile.
Adjust as Possible
Now that you know what could happen if things keep going this way, it’s time to prepare for the worst. What can you change about your operations, sales, etc, to keep things going at your current levels while this economic shift takes place?
It may mean increasing your retail prices, or learning to do more with less in other aspects of your business for a little while.
Another option is to look into temporarily using less expensive materials or supplies to offer the same products, while waiting for the market to level out again.
Wait it Out
History shows that these economic fluxes usually level out. While it may seem painful right now, the economies of the world are often like a roller coaster ride. There will be peaks and valleys, but it will all even out eventually.
Do not make the mistake of making a rash decision like as getting rid of your Chinese suppliers, because of the current increase. Just have patience.
While the shift of the Yuan into record territory these last few weeks has many people in a panic, the smarter path is to take a deep breath, plan for this trying period and look forward to when the markets are once again on the level ground you are accustomed to.