Purchasing Power Parity: The Smart Way to Buy in China

[ By Chris, Devonshire-Ellis, Senior Partner, Dezan Shira & Associates ]

With the West likely to fall into recession during the next couple of years, now is a good time to evaluate purchasing polices from emerging markets as the household pinch on buying products extends up the supply chain to the source of product?in this case, China (although this perspective can also be applied to other currencies such as those in Mexico, Brazil, India, Russia).

Purchasing power parity is the art of recognizing the true value of the local currency, and applying that to buying techniques. Let?s take for example, the U.S. dollar and the RMB. According to conventional wisdom and current exchange rates, the U.S. dollar is valued at US$1 = RMB6.8. In fact, the two currencies are rather more similar than is commonly acknowledged.

Both currencies have the unit of 100 as their largest denomination. Both feature pictures of deceased leaders. Both are the most sought after valued note in their respective nations. Yet, according to the current exchange rates, the RMB100 is only worth about US$15 (give or take a few cents). Yet purchasing power parity holds that in China, the RMB100 note will buy the same quantity of goods or services as the US$100 will in America; in which case, the two notes are essentially identical in their respective domains concerning their ability to purchase.

Next :
Expanding the China Market: How Emerging Asia Will Help Counter the Global Downturn


To know more, the whole issue is available (after a free subscription) on China Briefing website with others archives
For more information on China’s legal and tax issues or to ask for professional advices in related matters, please write to info@dezshira.com

0 comments

Add your comment

Commenting is allowed only for registered users.

Other articlesgo to homepage

Trends in the Chinese Online Education Industry

Trends in the Chinese Online Education IndustryComments Off

The Increase of China on the net Training Market place Income of online training sector in China achieved 84 billion Yuan in 2013, with a 19.9%-growth from 2012, based on the 2013-2014 China On-line Education Report unveiled by iResearch. The huge Potential of China on the internet Education Market place The 3 key engines are

US$1.8 Trillion : the Chinese Consumption by 2021

US$1.8 Trillion : the Chinese Consumption by 2021Comments Off

Luxurious manufacturers in China have had to deal with down a slowing financial system for many time, but a brand new report by Boston Consulting Group (BCG) and Alibaba Group’s study section, AliResearch sheds a more constructive light-weight on China’s purchaser economic system. By 2021, Chinese people are envisioned to add US$1.8 trillion in new

China Structure – Joint Ventures

China Structure – Joint Ventures(0)

Forming a joint venture in China can be a successful endeavor as long as each side?s goals, contributions and responsibilities are mutual and understood.

China Structure – Foreign-Invested Commercial Enterprises

China Structure – Foreign-Invested Commercial Enterprises(0)

Foreign-invested commercial enterprises are capable of conducting the following activities: Import, export, distribution and retailing Retailing ? selling goods and related services to individual persons from a fixed location, as well as through TV, telephone, mail order, internet, and vending machines Wholesaling ? selling goods and related services to companies and customers from industry, trade

China Structure – Wholly Foreign-Owned Enterprises

China Structure – Wholly Foreign-Owned Enterprises(0)

The wholly foreign-owned enterprise has become the investment vehicle of choice for the international investor wanting to manufacture, service or trade in China.

read more

Contacts and information

Social networks

Most popular categories

Real Time Analytics