Hi! Brendan here from China Import Formula. One of the questions I get all the time is, “How do you pay for your goods from China? What currency do you use? Do you use your local currency? Say, you’re from Australia, will you pay in Australian dollars? If you’re Canadian, will you pay in Canadian dollars? If you’re from New Zealand, would you pay in New Zealand dollars? Or, do you pay in the local currency in China, the Chinese yuan or the RMB?”
Well, the answer to that is actually neither. What you pay is in, of course, the world’s trading currency which is the US dollar. And, that’s how it works. In saying that more and more the Chinese factories are allowing you to pay in the local yuan or RMB and the benefit of that is often you can avoid paying the 2-3% commissions the bank will often charge you. So, if you can do that, that’s all for an advantage but not if in the time it will be in US dollar.
One final tip is to keep things flexible. If you’re bringing in a product from China that requires a lot of capital and also a very minimal amount of labor, for example, stainless steel water bottles need a lot of stainless steel. That will be in US dollars whereas the local labor will be in Chinese yuan. So, in that case, it’s often smarter to figure out whether your product is more material capital-intensive versus labor-intensive and if that’s the case, pick the actual currency that matches what you’re trying to do. So, in the case of the stainless steel water bottles, you’ll probably end up doing US dollars.
So, that’s the answer to what currency you should use. Almost always, it’s gonna be US dollars and in some cases, RMB. So, I hope that’s being helpful in terms of the currency you should pay in China. Please stay tuned for our next tips coming out real soon.