China Asserts Itself Before G20 Meeting

There is a very interesting article at Barron's online today about China asserting its new global leadership position in the lead-up to the G20 meeting in London next week.

China has recently criticized US financial policies and those of other Western nations. It has not only criticized, but has offered concrete proposals for reform of global financial mechanisms.

The main suggestion is to end the US dollar's reign as the world's reserve currency. The article mentions how much this position has benefited the USA and goes on to say the G20 meeting may be the end of this run.

Very interesting stuff. See the link to the article below:

http://online.barrons.com/article/SB123812879219054939.html

Exchange Rate Stable

As you can see in the chart, the RMB to USD exchange rate is essentially flat since about July 2008. There has been almost no attention paid to the exchange rate since this time when the economy really started to be in a recognized decline.

What will happen when the global economy starts to improve? A year ago I was guessing the long-term direction was for the RMB to continue to strengthen versus the dollar. Now I suspect this exchange rate is now set for a while and will not change much for the foreseeable future. The weakness of the economy has taken the pressure off and I don't see it returning for quite a while. In fact, I believe the probability of a reversal is higher than the probability of further RMB strengthening. However, I believe the highest likelihood is we see long-term stability.

The Value of the Plant Visit in China

THe China Sourcing Blog (www.chinasourcingblog.org) recently had a good post on why companies should visit the factories they are working with in China before placing the first order. While a good idea in theory, most small and mid-sized companies can't be wandering all over China visiting factories they haven't even ordered from yet.

That's where OPSA comes in. We are our customers' eyes and ears. And better than a one-time visit, we are in the factories often obtaining all the benefits mentioned in the CSB post and more.

What makes us unique among our competitors is that we also encourage our customers to visit us in China and the factories we are working with for them. This provides and even stronger benefit. Now the factory knows that not only is the customer serious enough to work through OPSA, but they also are visiting China themselves. It's a powerful message.

Check out the post at the link below.

http://www.chinasourcingblog.org/2009/03/china-plant-tours-why-you-have.html

China Sourcing - Lessons Learned Survey Data

Here's more information from the Deloitte survey presented at the last MITA meeting. Survey respondents reported six key lessons learned from their Chinese sourcing efforts:

- Make sourcing decisions not just on the basis of cost
- View China sourcing as a tool for ultimately gaining access to the Chinese market
- Be flexible and maintain some diversity of sourcing
- Establish stringent cost, quality and timing metrics prior to implementation of a sourcing decision
- Conduct detailed due diligence during the supplier selection process
- Take steps to watch contracts, delivery, and payments carefully so as to minimize misunderstandings

These are excellent lessons. I'm surprised there is nothing on relationships or contingency planning, although the flexibility lesson likely refers to having multiple options.