Beyond seeing people and products at the show, companies also discussed the possibility that the Chinese government may revalue the renminbi.
“We’re concerned about that; it means manufacturing costs will go up and there’s such intense competition at home,” said Troy Anderson, co-founder, FilterStream. “Retailers don’t want to hear about price increases.” In addition, companies would get less production per dollar, he added.
However, Chris Phillips, chief executive officer of coating company Thermolon, thought appreciation of the currency would be a positive move. “There’s not a great distribution of wealth in China,” and the renminbi is “artificially low; it’s exporting deflation to the rest of the world ... Its appreciation will help rebalance things.”
“Cost-wise, it will be a bad thing, but it’s going to improve the quality levels and on-time deliveries,” among other issues, said Juanita Coumbias, international sales and marketing director, Starfrit USA. “These fly-by-night [factories] will go away.”
The evolution China is going through now is similar to what Japan went through 30 years ago, she added, and 15 years ago in Taiwan. Unlike then, however, there’s no other country to replace China for lower manufacturing costs, she added.
That’s the bigger issue, said Peter Chapman, executive vice president, Maverick Industries. “The Chinese realize we have no other place to go. If they want to go up on towel prices, who’s going to stop them?” And while Vietnam and other countries are mentioned as replacements, Chapman said they don’t have the capability or the infrastructure to handle it.
“If they raise the renminbi there’s no place to go but pass the increases onto the retailer,” said Chapman. “This trend of lowering prices can’t continue forever.”—Andrea Lillo