US$1 hit RMB6.50 today

This means the export-led model of the last 30 years is changing.  Growth in the next 30 years will probably be IP and brand-driven.

The export model is no longer viable: labor and fuel costs are prohibitive and the land is polluted.  Labor cost increased some 30% to 100% in 2010 on top of currency exchange increase.  Harvesting and canning mandarin orange in Hunan, trucking the cans to Shanghai, crossing the Pacific Ocean to Long Beach and then on to a freight train to Walmart depots across the country no longer make sense.

China has >$3 trillion in foreign currency reserve, and counting.  The money has to come back to the U.S. sometime.  Unlike the Japanese in 1980s, they will not be buying trophies:  Pebble Beach, Rockefeller Center, Hawaiian Hotels… Instead the Chinese will be looking to extend their manufacturing and supply chain base to reach consumers directly.  This means buying Western brands.


About joseph1ng

Trained as a historian at Stanford, certified as an accountant, geeky by nature, CFO with U.S. and Chinese companies. Lived in Beijing, Shanghai, Tokyo but mostly in the Silicon Valley. China's $3 trillion foreign currency reserve will be deployed buying brands to bridge their supply chain to consumers.
This entry was posted in China Merger and Acquisition. Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s