A business friend of mine who recently returned from Shanghi, China, commented on the rising prices of foodstuff, clothes and essentials. As a result, the cost of living has rocketed and it’s not confined just to Shanghi.
No matter where you travel, you are aware of increasing prices. Luxury goods and brand names are snatched from the shelves as soon as they appear.
I have always held that the Chinese bubble will burst one day in the near future. We cannot continue to look to China for quality goods at a very competitive price. Who in the end is paying for this competitive price? Answer: The Chinese factory worker. The key To China’s industrial success is labour, and low cost labour at that.
Put your average worker on the high street and what do they see, luxury goods selling at ridiculously high prices. For example, a Hermes handbag retails for £8,000 in the UK and you can pay up to £10,000 in China for the same bag and they are snapped up at that price! They also see the price of their daily essentials increasing by the month.
What’s the knock on effect of all this?
Simple, the worker demands higher salaries, higher salaries mean higher ex factory prices, higher ex factory prices means the China bubble bursts.
It’s not going to burst today or next year but that bubble is getting bigger little by little.
My point is that traders should also look outside China for suppliers. Don’t wait for that bubble to burst.
How can they do this? How can they get the same quality as they are getting from China and at a competitive price? Answer: Trade with preferential trading partners.
The EU has nominated certain countries from whom we can import duty free or at a reduced rate of duty. However, it is not as easy as that. The goods you intend to purchase must comply with the Rules of Origin. For details of the rules consult your local custom office, Chamber of Commerce or Business Link.
By preferential trading you can reduce two of your major cost centres:
China Preferential Trading Country
Duty Payable Zero Duty
Deep Sea Freight Truck or low cost air freight
From a logistical point of view the preferential trading countries are nearer the UK than China, hence savings on freight. Savings on freight combined with Zero or reduced duty often results in a lower cost from a Preferential Trading Country than purchasing in China.
Try it. It works.
Great course worth every penny.
Mufaddal AliAlthough I am a qualified accountant, I enrolled in the course to gain a practical understanding of international trade which I require in my new roll within my organisation. The course was very informative especially the modules on incoterms, ...
A.B – Watford
Very helpful. Presently plainly but without much compromise