![]() ![]() This is a huge possible benefit, particularly for long-dated deals. Since interest rates are higher in China than in the US (for now anyway), the cost of forward cover is lower for yuan-rand transactions than dollar-rand transactions.Īs such, even if the Chinese supplier simply converts the dollar price to a yuan price at the prevailing spot exchange rate - that is, without providing a discount - the final price in rands will be lower when hedged. There is certainly no harm in trying.Īnother gain is paying lower forward points. In our experience this argument often works well, with suppliers providing discounts of 2% or even more. Simply put, in exchange for removing suppliers’ currency risk - as well as bringing them other benefits - a discount can be negotiated. While Chinese exporters may be reluctant to let go of that premium, it is certainly worthwhile for an SA importer to initiate the conversation. Most importantly, to manage currency risk, Chinese exporters have historically tended to build into their pricing a buffer of at least 2%-3%, and sometimes as much as 5%. Yuan invoicing presents many benefits to Chinese suppliers, so it is they who will often offer a discount on the dollar price. First, by potentially paying a lower price. It has benefits for suppliers too, making this potentially a win-win outcome for both sides. Those importing from China can derive significant benefits from being invoiced in yuan. However, this is changing quickly, and with good reason. SA importers traditionally tend to think in terms of paying their Chinese suppliers in dollars rather than in yuan.
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