Mar 28, 2008

Carl Weinberg on declining profitability among Chinese exporters

[Chinese] companies in the export sector are facing a cost squeeze. They are seeing exports to the U.S., as measured in yuan terms, generating less revenue as the dollar depreciates. They've also seen a rise in labor costs, as well as materials, and they've seen a change in tax policy, which has increased taxes by as much as 7% of their cost of goods sold. Altogether, they are looking at less profitability, and they are dealing with U.S. importers like Wal-Mart and Target, which are insensitive to cost increases and unwilling to give price concessions. As a result, they are being squeezed.

~ Carl Weinberg, chief economist, High Frequency Economics, "Coming: Cheaper Oil and a Stronger Buck: Interview with Carl Weinberg," Barron's, March 24, 2008

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