China

H&M Looking At Possibility To Pay Chinese Suppliers Directly In RMB

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As reported recently WSJ, H&M third-quarter earnings were hit as a stronger dollar added to sourcing costs.

The fluctuation in the US dollar/euro exchange rate is the single largest transaction exposure for the Stockholm-based retailer as it sources the majority of its clothes in dollars and sells most of its clothes in euros.

However, this may change in coming years as the company now looks at paying suppliers directly in Chinese Yuan or RMB.

“We pay our suppliers in dollars, because the dollar has been and still is a global currency. But as China’s economy grows and following a number of step-by-step deregulations for the Chinese currency, the RMB yuan is becoming increasingly accepted,” Nils Vinge, head of investor relations told Dow Jones Newswires, adding that while H&M is studying the possibility of paying directly in yuan, they can’t say if or when this will become a reality.

“We look for what is simplest, most practical and effective. We report in Swedish krona, and our Chinese suppliers report in their currency. And as the dollar, the transaction currency, fluctuates, our suppliers have to add a risk premium. They also have currency exchange charges, and also they may have to pay to hedge dollars. If they can cut costs by charging us in their own currency it will be easier. And cheaper for us. If payments are more efficient, everybody profits,” he said.

He also said that this will depend on how much they will source in China in the future.

“It’s an important sourcing market for us now. But who knows in ten or twenty years, where we will buy our clothes.”

via H&M Looking At Possibility To Pay Chinese Suppliers Directly In Yuan – WSJ.com.

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