In the long run, this trend was expected, as I wrote here. Financial markets were anticipating this move — and now they are anticipating even stronger depreciation.
On the positive side, Chinese suppliers will have strong pressure to reduce their USD prices if this trend continues.
However, if your supplier purchases a high amount of imported goods, this devaluation will mean more expensive components, and overall their prices won’t decrease. Add to this the numerous excuses Chinese suppliers are ready to give you (wages are up. we underestimated the complexity of your production, our supplier insists on a price increase, etc.), and many importers will be given no rebate.
How low can the RMB get? If the export numbers don’t get better, if Beijing thinks it impacts the country’s growth and employment in a significant way, AND if the inflationary pressure remains moderate, a return to 6.8 or even 7.0 RMB per USD wouldn’t surprise me. The truth is, nobody knows.
We are actually back to the situation of Mid-2012.
But, seen on a longer time period, this move isn’t really significant (yet?).
How to take full advantage of this trend? You can get quotes in RMB and settle what you purchase in RMB, as I explained here. A number of large companies are already doing this, and there is no reason midsize importers can’t do this.
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