Paying Chinese suppliers in local currency, have you explored the option?
Most businesses in the West that trade with China pay their suppliers in US dollars. However, paying your Chinese suppliers in Renminbi (RMB) can offer several benefits:
Avoid renegotiating prices due to currency movements
Reduce fees and conversion loss
Forge stronger relationships with Chinese suppliers
Gain more bargaining power
Potential Business Issue
With the strengthening of RMB against USD during the second half of 2020, suppliers increased prices in USD to compensate for the exchange rate movement and Australian companies could end up cutting their profit margins in order to protect client relationships.
This is something that we do not want to happen again in 2021 if the RMB is to appreciate further against the USD.
USD/RMB Outlook 2021
Many banks and analysts believe USD/RMB will keep on decreasing in 2021 for 2 main reasons:
Depreciation of the USD in a “risk on” environment where investors favour riskier assets to safe havens like the USD.
Appreciation of the Yuan: the Chinese economy has rebounded quicker than most other economies and a stronger Yuan would deleverage the debt of Chinese companies as many of them are indebted in USD.
The USD/CNY has fallen over 9% since July 2020. No doubt the Chinese suppliers are also feeling this on their side.
This is something to think about when speaking to your suppliers, ask them for an invoice in both USD and RMB, I can then work with you to see if there is anyway that we can potentially save costs on their side and yours, meaning a better priced product for you.
Get in touch if you think I can help.