Tips on how to Cope with The additional Cost of Chinese Currency Fluctuations

It’s the Chinese New Year, and 2014 is the year of the pony.

If what you are promoting works with Chinese companies, there are a few things to grasp.

Although we regularly examine Chinese currency because the Yuan, the official name is the Renminbi (RMB).  Use of RMB currency is growing.

According to November and December SWIFT data, the RMB has broken into the head ten most-used currencies for payments.

But in the event you do business with China, exchanges between the dollar and this Chinese currency may bring risks.

According to Alfred Nader, vp of corporate strategy and development at Western Union Business Solutions , there are a few things you are able to do to diminish the financial risk of currency fluctuations. Listed here are three strategies:

Pay Chinese vendors and partners in RMB in place of U.S. dollars.

“Our research shows that one in five Chinese suppliers add roughly 3-4% to invoices to hide FX risk, that’s eliminated with RMB payments,” says Nader. Knowing this, U.S. businesses can look to barter a reduction with their Chinese suppliers by asking in the event that they like to be paid in RMB, he adds.

Lock in exchange rates for so long as 9 months.

This creates stability on small business’ balance sheets.  When your expense levels, you could more accurately forecast.

Use the offer to pay in RMB to open a dialogue.

You can initiate a talk to vary terms and improve business relationships, once you raise the currency issue.  By meeting any other side partway, you start a very powerful and potentially profitable dialogue.

Chinese currency photo via Shutterstock

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