Friday, November 18, 2005

Taiwanese manufacturers face fallout from Renminbi rise

Survived SARS has a link to an IHT article on China's currency policies, which will have grave impact on Taiwanese manufacturers in China.

"If the renminbi continues to appreciate, it will have a big impact on every company that has an operation in China," said Li Shenghai, a finance director at Samsung, which has more than 50,000 employees in China.
"We will probably have to relocate our factories which make low-end products to some other countries where the cost is lower, such as Thailand and Malaysia," he said.
The hardest hit could be thousands of Chinese, Hong Kong and Taiwan companies that are important suppliers to computer makers like Dell and large Western retailers like Gap and Wal-Mart Stores.
"This is basically the beginning," said Lin Chungyu, a vice chairman for the Taiwanese Business Association in Dongguan, one of China's biggest electronics manufacturing centers. "If the renminbi continues to appreciate, as analysts predict, it will have a large impact on Taiwanese manufacturers."
Many Wall Street economists are forecasting that over the next year or two, the yuan will continue to rise against the dollar, perhaps by as much as 15 percent.

India, here we come.....


Jason said...

Interesting article about Bangalore's declining fortunes over on Asia Times Online this week:


Sun Bin said...

there are two sides of the coin.

the assets that taiwanese investors hold (factory, buildings/etc) automatically appreaciate.

so the question is, are they able to increase price of their products. if they can, then they win more than lose.

remember the 1997 currency crisis hurted taiwanese investors a lot. so maybe appreciation is a good thing.

india is too far away, with complicated regulation. vietnam or philippines ar more convenient.

Carr said...

How can factories and buildings appreciate if the profit that they carry decrease? How can you sell it at an high price when everybody is selling?

Appreciation of Renmibi is just a good way Chinese government can continue buying companies overseas and US governmental bond.

julia said...

please take the Julia link off your page

Michael Turton said...

What Julia link? What are you talking about?

Sun Bin said...


if you own a building in a country, and the price does not change.
when you sell the building and convert to another currency, or when you report in your balance sheet, outsdie the country. the value is higher.

this can be booked as extraordinary profit.

who said everyone is selling. everyone was selling when the currency crashed in SE Asia in 1997-98 (herb effect). that was the reason many people blamed Lee Tenghui for coercing them to invest in Indonesia/Philippines in early 1990s.
no one is selling is currency appreciates, because some people expect more appreciation.