Friday, August 27, 2004

You can bet we're next...

First Chinese car to hit road in Australia. This is pretty cool news. To my view, pretty much the only way the Chinese automotive industry will be able to compete abroad is through this type of direct foreign investment by established firms like Volkswagen. From my experience dealing with Geely Motor, the third largest Chinese automobile manufacturer, I would be very hesitant in dealing with Chinese cars. That company produces some pretty awful motorscooters, although they look nearly identical to decent brands. I can only imagine what their cars are like... While it may be unfair to apply these experiences to the entire industry, I find it unlikely that any Chinese manufacturers will be able to close the technological gap without the assistance of the established industry giants. Chinese automobile exports are definitely a trend worth watching though...

Maersk raises profit forecasts

World's largest shipping company seeing profit increases thanks to china trade. Maersk raised its profit forecasts for this year, largely based on increased demand for Chinese exports. Maersk is a great company to work with, whether you're big or small, a newcomer or oldtimer. You definitely pay a premium, but its often worth it to deal with competent people who are responsive when you have to get goods to market quickly. They'll also provide 3rd party warehousing in some ports.

Wednesday, August 25, 2004

Please don't listen to these guys...

The IMF told China today that it would benefit from allowing its exchange rate to fluctuate. If the Chinese government listens to the technocrats in Washington, it could drastically undermine the profits of every firm importing from East Asia. As it stands, China fixes the Yuan at a value as much as 40 percent below economists' estimates of its true value, meaning that everything we buy from there costs a lot less than it should.

Cheap labor can account for a significant portion of the inexpensive motorcycles, wood furniture products, and other goods we're importing, but the undervalued Yuan may be the most important factor underlying our industry's profits. The good news for importers on this side of the Pacific: China doesn't have to listen to the IMF. They have enormous foreign exchange reserves, so they can just ignore the international bankers.

Nevertheless, no economy can maintain China's growth rate indefinitely, so there remains significant question of how the government can cool off the economy without causing it to stall. You can be sure we'll be following any news about a currency revaluation VERY closely. I might even lose some sleep over it... My advice: listen to our boy Greenspan instead.

China Motorcycle Industry Tears It Up

Chinese Motorcycle Industry Growing 30% Annually While I wouldn't recommend paying the thousand dollars that Global Sources is asking for this report, it's definitely worth reading their news release. As one who got into the importing business in the motorsports industry, its no surprise to learn that China is growing at this torrid pace. The good news is that analysts are finally predicting improvements in quality resulting from industry consolidation. Hopefully this will lift up some of the brands notorious for putting out crap. Looking to import some good motorcycles from China to take advantage of this trend? Contact KPX Motors, a reliable importer based in Arizona with a national distribution and support network.

Tuesday, August 24, 2004

They probably wish they did...

Will Mexico Block China From the WTO? I just stumbled across this article from back in 2001. As we all know, China did enter the World Trade Organization, but that doesn't mean that Mexico's fears of Chinese imports were ill-founded. In the next two years, as our southern neighbor is forced to drastically reduce its tariffs on Chinese goods, we can expect to see some interesting shifts in North American markets.

The good news for Mexican industry is that their proximity to the U.S. market will provide their manufacturing sector with some degree of security, despite wages four times as high as Chinese laborers. Industries that require rapid turn around and the ability to reach the market in days--rather than weeks--will continue to prosper south of the border. Less time-sensitive industries will flounder in Meixco. Chinese goods will not only force them out of the U.S. market, but also domestic ones.

It takes considerable expertise to tap Latin American markets for Chinese goods, but a well- positioned player stands to benefit in 2006 when Mexico lifts its tariffs. Now's the time to get moving...

Mexico vs. China: here and here.


China the Low Cost Provider -- of DVDs this time...

China: the low-cost provider
According to CNET, for the first five months of 2004 the average price of a DVD player made in China was $40.80. The average cost to produce it, including operating costs, was $39.80. (Just five years ago, it cost at least $500 to purchase one in the U.S., guaranteeing huge profits to its manufacturers. Clearly, the profit margins to manufacture a DVD player have fallen dramatically.) In those same five months, China manufactured 41 million DVD players on outsourcing orders from a variety of firms, such as Sony, Philips, and Matsushita Electric Industrial Company's Panasonic.