As you may have seen in the press, last month, the People’s Bank of China (PBOC) took unprecedented steps to devalue the Chinese currency (the yuan renminbi). The PBOC’s moves were widely seen as an attempt by the Chinese government to boost exports and support a flagging economy (by making Chinese products cheaper and, hence, more attractive to foreign purchasers).
Now, the other shoe is dropping. It is being reported that a number of large U.S. retailers are pressuring their Chinese suppliers to lower their prices. These companies have realized that the devaluation of the yuan means that the products they buy are cheaper to produce, and they want the producers to share those savings.
With the yuan down several points this year, all companies that purchase substantial volumes/values from suppliers in China should be mindful of this development and negotiate accordingly.
We hope this is helpful. If you have any questions, please let us know.