It still has a little way to go and we might see similar changes again over the next 5 days. Once again though, this advice is in contrast to the general consensus, so be careful.

If you are not already using a google adwords/analytics account then set one up.

If you are selling dog baskets and want to determine interest in China then use googles translate functionto translate into Chinese.

Enter this into your adwords campaign and it will give you another chunk of the most appropriate search terms for dog baskets and related products in Chinese, you could get between 10 and 100 suggestions, so pick carefully, then set your bids and off you go.

You can then gain access to data which will show you how many times that search term was used and from this you can begin to calculate the size of the market. Equally you can also determine, by the cost of your bid against your positioning what your likely competition might be.

Direct people to your web site or better still create a web page specific to the region targetted and be genuine in explaining to your potential customers what you are doing and what you are proposing and ask for their feedback, you might be pleasantly surprised at what you get.

It might sound a little complicated for those not familiar with google adwords but it’s really staightforward and the help function is pretty useful. You can set a budget of say £100 per day but of course if there is no interest in your product/search term it will not be used up however if there is and it does get used up maybe you should be booking a flight and getting out there to exploit the opportunity.

Yet further evidence that China will not be badgered into allowing an immediate and uncontrolled rise in its currency. Whilst the UK and Europe are part of the pack urging China to do so it is the US leading it and as such China will dig it’s heals in against the chief protagonist. I love the US, I love the Americans, I have a business there, but they are once again showing their arrogance, right now it is time to back off and leave the Chinese to define their own timescales over this issue.

Be ready for some Chinese fireworks.

My congratulations to Chris Chan and the team at Fired Up Corporation in Zhongshan, Guangdong Province for securing the contract to supply 60,000 rice cookers a year to a well known Chinese supermarket supplier.

Fired Up have been keen to diversify their range of products, which are in the main electrical heating products for both export and domestic markets and through an business relationship introduction were able to demonstrate their ability to compete on price on such a commodity product. Of course, Fired Up were also keen to demonstrate their Corporate Social Responsibility credentials and the customer said this was a factor in determining their choice of supplier.

Well done to all concerned.

Here are the reasons:

1. GBP has undergone a drop against the Euro in recent weeks yet there is very little to support this shift.

2. Business sentiment in the UK has turned the corner and whilst most operators believe the coming months will be challenging, they are now looking forward improving conditions.

3. Interest rates in the UK will increase very soon.

4. Chinese VAT export rebates are already dropping in some product areas and this trend is likely to increase in the less value added categories making products more expensive to export.

4. Most importantly, though, is that China will need an economic ally in Europe and the UK as it continues its battle with the US and will control its currency to favour exports to this part of the world.

Of course, I could be completely wrong and  would be interested to hear counter arguments.

Having, what feels like, only just got back to work following the Autumn Festival China is once again shutting down its factories for the National Holidays.

The whole country comes to almost shutdown for a couple of days with most business’s closing for a full five days. For those companies wishing for any of their staff to put in a few extra hours over the holidays it will cost them a statutory minimum of at least double pay. The most intriguing thing for me about the holidays is that when national holidays occur over a normal working day the banks and other such institutions will alter their working week to accommodate. Could you imagine banks opening on Saturday and Sunday so they could have Wednesday and Thursday off in the UK.

Just attended the Nantou Town, Zhonghshan City annual Dragon Boat Festival as a guest of our local party secretary and what a fantastic sight it was.

Over 130 dragon boats set off in what is a mad dash for the first bend. Countless capsize in the melee and one or two of the more practised teams begin to pull away. The course is around 3 miles long and circles an island on one of the tributaries to the Pearl River delta. The race is 3 hours long. After the first lap 3 teams are beginning to pull away with boat number 98, which is crewed by a local team headed by the builder who actually built my factory, coming past in second. After the next lap 98 is leading the way and maintains this position right through to the end. To see the strength, stamina and sheer determination of the leading competitors was literally awe inspiring, especially as this was in 38’C heat.

The winners were rewarded with a large red pocket and all competitors enjoyed an all you can eat hog roast. Over 85,000 people attended the event and from what I could see enjoyed the day. The local government are the organiser and overall sponsor of the event but local business’s provide support sponsorship and exhibit the products in a commercial area where guests are invited to sample some of the local produce.

A good get together, a good atmosphere and a good result for all involved. Well Done.

The Chinese Yuan has strengthened against almost every Worldwide currency over the last 12 Months. Much of this increase is tied to the strengthening of the US Dollar and the fact that the RMB is loosely linked to it, but also the increase is due to the past and expected future growth of the Chinese economy.

There have been huge inflows of investment and cash into China and its economy over the last year to such an extent that the government had to put in place almost emergency measures to curb and control this inflow. Well the tide has now turned whilst no-one would describe the situation as an exodus there most certainly is an air of apprehension over current investments which I feel is likely to escalate.

Over recent years the Chinese have not suffered any loss of confidence in their economy and with double digit growth everyone has enjoyed a fairly profitable period. However, what will be interesting is how the Chinese react to the current situation, to reduced growth , massive redundancies and a general weakening of previously strong indicators. Chinese are very superstitious and extremely susceptible to emotion and as soon as they began to experience a drop in confidence we may see a run like nothing we have experienced in the West. We may well see an exodus.

My money is on a weakening Yuan over the next 12 months.

The shipping freight rate from China on most routes into the West have at least halved over the last few weeks. Will it last and if so for how long?

The reason for the drop is threefold.

Primarily, the amount of goods being shipped from China has dropped dramatically over recent months and as with any supply and demand relationship the less demand the lower the price. This demand is not likely to increase for quite some time and may in fact reduce yet more.

Secondly, the impact of the supply and demand effect has to some degree being reduced in the past by the ‘cartel’ or ‘conference’ of freight providers who agreed, controlled and set prices. This cartel has now broken up and now as in almost every other business in the world people are fighting for the work. Again this is not likely to change any time soon.

Finally and fairly obviously, Oil prices have halved and the beneficial impact on shipping costs is huge. It is not suggested by pundits that the price of oil will return to the dizzying heights of a few months ago therefore once again no change likely here.

In summary, I see no reason why shipping rates will change significantly any time soon.

This is extremely good news for anyone importing bulky products from China and will go some way towards alleviating the damaging currency conditions. The Chinese Government have also acted swiftly to increase tax rebates from 5% to 13% on some household furniture items. Suddenly, products that may not have being economically viable to import due to their bulk in the past are viable now.

Expect to see lots of Chinese manufactured cheap, bulky, household furniture products in the shops any time soon.

]]> http://www.forsaleinchina.co.uk/blog/index.php/the-impact-of-the-massive-drop-in-china-shipping-rates/feed 0 http://www.forsaleinchina.co.uk/blog/index.php/chinese-yuan-vs-british-pound-exchange-rates http://www.forsaleinchina.co.uk/blog/index.php/chinese-yuan-vs-british-pound-exchange-rates#comments Mon, 13 Oct 2008 09:03:51 +0000 http://www.forsaleinchina.co.uk/blog/index.php/chinese-yuan-vs-british-pound-exchange-rates

The Chinese Yuan has strengthened nearly 25% against the British Pound since the beginning of 2008. For those traders buying in pounds, or to a lesser, yet still significant effect, in Euros, profit is being eroded or wiped out completely.

Is the trend of a strengthening Yuan likely to change in the near future. Yes……. but not significantly.

I expect to see the Yuan level at around 12.00 to the pound this week, however that is still a 20% drop on earlier this year……… I also then expect the Yuan….. over the course of the next year to strengthen by around 3%.

This is not necessarily as catastrophic as one might imagine. As the Yuan strengthens against the Pound and particularly the Euro, the cost of Chinese capital asset purchases from Europe will come down. Externally purchased raw materials, many of which also come from Europe, will come down. As the ‘value added’ in China is mainly labour of which this may only represent between 10% and 30% of the finished goods price the net effect of currency fluctuations may not be quite so dramatic.

It does of course take time for these anomalies to balance. Raw material purchases are often made well in advance of the eventual sale and there will not be any purchase gains made by Chinese companies on sales made today. However it is important that when negotiating your next order or contract that you factor in the likely savings to be made in China and pursue reductions accordingly.

The Chinese will not volunteer this information and will be happy to sit back and take the extra profit when it comes……. and why shouldn’t they?……… I would.

One final thing to consider is that China exports more goods to the USA than anywhere else in the world but its US imports are tiny by comparison. The Yuan, whilst not officially pegged to the US Dollar, follows it closely. It suits the US to have China buying its machines and raw materials more cheaply from Europe thus allowing China to sell its goods more cheaply to the US whilst still being politically expedient at home in not allowing the Dollar to strengthen appreciably against the Yuan.

Whilst ever China and the US are satisfied with the situation it is unlikely to change and as such I cannot see the exchange rates altering significantly any time soon.