Yuan hits new 6 year high
The big deal isn’t that the Chinese currency is getting stronger and stronger; everybody knows that by now. The big news is what the strong RMB is NOT doing. There has been very little affect on the level of exports from China.
I think two mega trends are happening to offset the impact of a rising RMB:
- Chinese factories are learning to be more efficient in material usage and labor allocation.
- Western buyers like Walmart have squeezed suppliers in China down to the tightest margins already, and since there is no “other China” to move production, the cost is getting passed on to the end consumer.
Attention K-Mart shoppers, get ready to pay more! The world is in an inflationary period. Period.