Factories cut deals to boost falling demand

If you think the drop in the Aussie dollar means sourcing goods from China is no longer cost-competitive, think again.  Latest figures from the HSBC Purchasing Managers Index (PMI) suggest that manufacturing in China actually contracted in May.  The preliminary result of 49.6 not only falls below the 50 mark which indicates contraction, it”s also the lowest since last October.

Other signs that the Chinese manufacturing sector is hurting show in the sub-indexes for April.  For the second month running, more than 13% reported increased stocks of finished goods and reduced prices.  So the falling dollar buys fewer renminbi, but the same amount of goods.

What”s more, Hornet”s recent experience is that at least some suppliers are more willing to be flexible on minimum order quantities.  It seems they”re taking a pragmatic approach – selling some is better than selling none at all.

In this environment, it”s worth taking another look at what you might be able to source from China.  Why not contact us to see if we can help you benefit from China”s current manufacturing slump.

Update June 6, 2013. We”ve had some interest in this post and a few queries.  Just to clarify, the manufacturing slump means that prices have gone down, but that”s in renminbi, not in dollars.  After accounting for the falling dollar, the price in Aussie dollars often remains about the same.  So if it was worth investigating before, it”s still worth it now.  And with the Chinese factories much more flexible about minimum order quantities, it”s a great time to try sourcing something you usually get locally.

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