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China Toy makers fear Yuan rise
Oct. 28 (Bloomberg) -- Lucy Liang, a sales manager for Jiangsu Zhongxin Toys Co., disappointed potential clients from the U.S. and Europe inspecting the pink and yellow teddy bears at China’s biggest trade fair.
“My boss orders us to turn down all the orders for the good of the company” because China’s yuan may rise, crimping profit margins, said Liang. “Even first-class economists can’t predict whether the yuan will appreciate or by how much. How could we?”
The country’s toymakers accept profit margins of as narrow as 3 percent to stay competitive. The low profitability, coupled with payment periods of three months or more, means they are particularly vulnerable to currency fluctuations, said Lin Songli, an analyst with Guosen Securities in Beijing.
The yuan has gained 6.6 percent against the euro and 2.2 percent against the dollar so far this year. It traded at 6.68 to the dollar yesterday in Shanghai, compared with 6.83 at the beginning of the year.
“If the yuan rises to 6 to the dollar, we’re doomed,” said Simon Pan, general manager of closely held Zhejiang Huangyan Hongfan Toys Factory.
It’s raising prices by 3 percent to 5 percent to offset the Chinese currency’s gains, and further increases would mean losing customers, he said in an interview at his booth, which was filled with educational toys and metal brainteasers destined for the U.S.
Oct. 28 (Bloomberg) -- Lucy Liang, a sales manager for Jiangsu Zhongxin Toys Co., disappointed potential clients from the U.S. and Europe inspecting the pink and yellow teddy bears at China’s biggest trade fair.
“My boss orders us to turn down all the orders for the good of the company” because China’s yuan may rise, crimping profit margins, said Liang. “Even first-class economists can’t predict whether the yuan will appreciate or by how much. How could we?”
The country’s toymakers accept profit margins of as narrow as 3 percent to stay competitive. The low profitability, coupled with payment periods of three months or more, means they are particularly vulnerable to currency fluctuations, said Lin Songli, an analyst with Guosen Securities in Beijing.
The yuan has gained 6.6 percent against the euro and 2.2 percent against the dollar so far this year. It traded at 6.68 to the dollar yesterday in Shanghai, compared with 6.83 at the beginning of the year.
“If the yuan rises to 6 to the dollar, we’re doomed,” said Simon Pan, general manager of closely held Zhejiang Huangyan Hongfan Toys Factory.
It’s raising prices by 3 percent to 5 percent to offset the Chinese currency’s gains, and further increases would mean losing customers, he said in an interview at his booth, which was filled with educational toys and metal brainteasers destined for the U.S.
