Weakening of the Chinese Yuan

by Kevin Kahn and Jin Kong

Photo by Seongjoon Cho/Bloomberg

Photo by Seongjoon Cho/Bloomberg

China’s gradual devaluation of currency has gotten much attention lately. It has stirred speculations from deliberate currency war to a weakened economy signaling troubles ahead. In all likelihood, China is trying to stimulate more exports and remain competitive domestically against foreign imports. But as the RMB becomes a reserve currency, China is also very keen on keeping it stable and the fluctuations narrow.

A weaker RMB against the dollar does mean higher prices for selling US-made goods in China. Although China is transitioning into a consumption based economy, the pace of consumption is nowhere near where it would be if China was still on double digit growth. As of late, China’s growth is mostly concentrated in exports and it is questionable if importing into China is as easy and lucrative as others would make us believe.

Not surprisingly, the RMB has strengthened against the British Pound. China and Britain have also been forging ever-closer relationships. While we can speculate whether China can be the saving grace to the controversial Brexit vote, we are certain the currency fluctuations have made British-manufactured goods more competitive in China than US-manufactured goods.

It is important to remember China is still a centrally planned economy and its currency devaluation is very much deliberate and strategic, likely independent of any foreign influences. It is important to be proactive; after all, it is much more productive to flow with the changes than to complain against it. There is not much one can do about the Chinese government’s policies but as Bruce Lee once said, be like water.

Frequent evaluation of the exchange rate and aggressive negotiation of prices is key to staying ahead and maximizing your margins. If you are sourcing from China and you have not received a price reduction from your vendors, now is a good time to push for one. Generally accepted revaluation practice, if not outlined in a contract, is a 3% swing in pricing. With a 4.6% devaluation in 2016, it is worth the effort to ask for a reduction in pricing on Chinese purchased goods.

If you are selling to China, you may want to reevaluate your business operations and hedge against risks where you can. Since you will need to evaluate the structural and transaction risks more carefully, diligence and completeness is key. Adjusting the sales price is only one way, the key is to focus on cash-flow, supply chain, competitor actions, and consumer preferences in China. It may be difficult to hedge against risks with pricing adjustments alone, but process innovation and efficiency improvements together can be helpful.

For those seeking investors from China, now would be a very advantageous time to reach out, as Chinese businesses and personal investors alike are looking for opportunities to invest in foreign denominated investments – to hedge their assets against a declining Yuan.

If you would like to explore ways to strengthen your business opportunities with China, Kevin Kahn of K2 Industrial Controls Int’l Ltd and Jin Kong of Kong Esq., LLC can be of assistance. Just contact us at info@china-midwest.com to get connected.

E-Commerce in China & Beyond Seminar

E-commerce Flyer Final

In 2015, Chinese consumers spent close to 4 trillion yuan ($589.61 Billion) buying goods online. China’s web sales surpassed U.S. in 2013, making it by far the world’s largest e-commerce market. The major drivers in China’s e-commerce boom have been cross-border sales, mobile sales, and e-commerce in villages.

To better understand e-commerce in China and the disruptive nature of market players, we are bringing together a panel of experts to discuss the challenges and opportunities ahead. Please join us on August 29th at 6:30PM for this enlightening panel discussion. We welcome Ken Ma (via teleconference) of Tmall Global, Richard Cant of Dezan Shira, and Joe Dehner of Frost Brown Todd to share their experiences and insights in looking ahead and navigating the prosperous e-commerce channels of China and beyond.

About Tmall. Tmall is China’s premier B2C online retail market, operated by the Chinese e-commerce giant The Alibaba Group. It achieved 200 billion RMB ($32 Billion) gross merchandise volume in 2012 offering products from more than 70,000 merchants. Many multinational brands, such as Nike, Gap, Levi’s, Lacoste, Microsoft, Sony, P&G, Nestle, Toys-R-Us, etc., operate flagship stores on Tmall.

Speakers:

Ken Ma – Director of Int’l Development, Tmall Global (Alibaba Group)
Ken has 10+ years global e-commerce business experience in China. He help developed over 100 top international brands for Tmall.com and is currently the head of Tmall’s international business development team for cross border e-commerce. Prior to Tmall, he managed Alibaba’s markets in Indonesia, Brazil and Japan, and had developed the company’s markets in Malaysia and Vietnam.

Richard Cant – North American Director, Dezan Shira & Associates (Boston)
Richard guides North American individuals and companies through the process of establishing, maintaining, and expanding their businesses in China. His areas of practice include: corporate accounting and compliance, establishing businesses in China and Hong Kong, due diligence and M&A, and taxation planning and structuring. Prior to Dezan Shira & Associates, Richard was an Australian lawyer and Certified Public Accountant, and was also a partner at Ernst & Young Australia. He has worked in business and commercial consulting both in Australia and China for the past 20 years.

Joe Dehner – Member, Frost Brown Todd
Joe chairs this 500+-attorney law firm’s International Services Group.  He advises global businesses from large to small on a broad variety of business matters, including data privacy, product and services distribution, multinational business structures, compliance, tax and other issues.  He has advised U.S., Chinese and other businesses on e-commerce matters since the start of the digital age.

Moderated by Jin Kong, G4C Chairman 2016-17.

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New Chairman’s Welcome

Greater Cincinnati Chinese Chamber of Commerce (G4C) Chairman’s Welcome

Dear G4C members,

I am honored to serve as your Chairman during this 2016-17 year. I want to thank our immediate past Chair Michael Kou, of Growth by Export, for his dedication and service to the G4C. Under his leadership, this Chamber experienced a tremendous transformation. I look forward to continuing his hard work and I am committed to doing my best in executing the responsibilities charged to me. Michael will remain with the Board as Chair Emeritus and will continue to serve as our trusted advisor. Also I want to thank Catalin Macarie (UC), Kevin Kahn (K2 Industrial Controls International), and Louisa Luk (Green Energy Enterprises) for their hard work as part of the outgoing 2015-16 executive team.

We now begin the year of the Monkey and prepare to welcome the Rooster. This is a transitional year for G4C and we are under new management. Tessa Xuan, Executive Director, is hard at-work building organizational processes and volunteer capacity to ensure our viability and sustainability. We are lucky to have her and she needs all of our support. My goal this year is to assist her the best I can to stabilize and grow this Chamber, to build a succession plan for our volunteer leadership ranks, and to promote awareness and engagement among G4C members and the region at-large. I am fortunate to have a strong Executive Committee to help with the heavy lifting and to help accomplish this. A special thanks to:

  • John Guo from 5/3 Bank (1st Vice Chair of Membership)
  • Franklin Lim from Kroger (2nd Vice Chair of Programs)
  • Hui-Pin Sepulveda from Deloitte Tax (Treasurer)
  • Rhonda Schechter from Frost Brown Todd (Secretary)

In China, there is a saying: 德本財末 – virtue first, wealth follows. This Chamber was founded as a group of Chinese restaurateurs who thought to help themselves by helping each other. Over the years, many others have come and gone and made this Chamber what it is today. As we struggle to define the Chamber’s identity, associated of Chinese? Of Asians? Or of Americans who are doing business in China? We come to realize such an inquiry begs the fundamental question of why we are coming together. We are not here to benefit one person, one race, one culture, or one country in particular. On the contrary, we are associated together because we are all vested in our connection with the richness of Chinese culture, as well as our mutual interests in our professional endeavors. We are associated because we believe in the timeless Chinese virtues pertinent to the changes around us; we believe the sizable impact China will have on our common future. And most importantly, we are associated together because we want to make the Greater Cincinnati region more diverse and prosperous than we found it.

So we come together as a “Chinese Chamber” charged with the task of taking care of one another in these trying times. In light of the recent racial tensions, global terror, and growing distance between all of us, I stand with my fellow board members committed to deliver to you, our members, a Chamber of Commerce worthy of its name and tradition.

Yours truly,

Jin Kong, Esq.

Board Chairman 2016-17