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Devalued and Risky: Should You Proactively Finance Chinese Suppliers?

The level of nuanced arguments surrounding China’s dual-move to a more freely floating currency, combined with an immediate devaluation – close to 5% at the time of writing this piece – has reached a fever pitch in international business circles. Aside from my own views about China’s general behavior from a business context, I personally believe it’s an ingenious move of desperation that would have been difficult to predict ahead of time.

From a sourcing perspective in terms of negotiation with suppliers over price decreases, we recently shared some advice for our subscribers on Spend Matters in a research brief, What a Devalued Chinese RMB Means For China Sourcing Strategies. But speaking more broadly than negotiating price decreases as a result of the devaluation, there is the broader question of supply risk with Chinese vendors – and the level of action companies should take to protect their supply chains through active trade financing programs.