Yuan Appreciation; Price Explosion Expected
for Chinese P&A

SHANGHAI, China – China is about to raise the exchange rate for its national currency, the Yuan Renminbi. In addition to a more expensive Yuan the current labour crisis in China, which results in higher wages, is expected to lead to a price explosion for made in China (e)Bikes, parts and accessories.

That the Chinese government is about to raise the exchange rate for the Yuan Renminbi is according to business publications in China indicated by government spokesmen who are preparing the country’s export sector for it. Expectations are that within weeks the Yuan Renminibi rate will be raised.

In Beijing, Shanghai and Hong Kong business banks economists expect that the Yuan appreciation will be limited. They expect the exchange rate to be raised by 5 to 6%. A raise by 20 to 40% as strongly suggested by the US government is totally unacceptable for the Chinese government, say these sources.

A more expensive Yuan Renminibi will add to an already anticipated price hike for Chinese made (electric) bikes, parts and accessories. At last month’s Taipei Cycle Show all European companies sourcing products in China were complaining about the fact that next to lead-times also prices were on the rise.

The labour crisis leads to all factories in China paying more to their workers than ever before. Hourly wages are up from US$ 1.25 to US$ 1.65 which boils down to a 32% salary increase. Combined with a 6% appreciation of the Yuan Renminibi, makes that companies sourcing bike parts and accessories have to take a price hike of close to 40% into account for their deliveries from China.

Combined with lead-times problems that go from bad to worse, European companies are planning to switch sourcing to other low labour cost countries. Bike Europe recently interviewed Accell Group NV Chief Operating Officer Jeroen Snijders Blok on this. The interview will be published in Bike Europe’s April edition; publication date April 29, 2010.