Chinese goods likely to get costlier during upcoming festive season
KATHMANDU, Aug 10: Recent strengthening of US dollar and Chinese currency, Renminbi (RMB), against Nepali rupees is set to bite Nepali consumers - who largely rely on Chinese clothes and household appliances - as major festivals knock on their doors this year.
Traders, who have started exploring suppliers to build their stocks for the upcoming festive consumptions, said the Chinese suppliers are charging at least 30 percent higher compared to that of last year.
As they are not sure how consumers would respond to such a hike in prices, the traders are keeping their fingers crossed.
Annually, more than 60 percent of the total trade in Chinese goods takes place during the festive seasons between September and November. But traders said the drastic rise in prices could alter this pattern by diminishing the trade volume.
"The situation has made us skeptical and we are unable to decide whether or not to place the same volume of order as we did in the past," said Durga Bahadur Shrestha, former president of Trans-Himalayan Trade Association (THTA).
In order to deal with the perceived risk, Shrestha told Republica that some traders have started to place purchase orders only for goods that are under stock clearance schemes offered by Chinese suppliers.
"The weakening of rupee has already made Chinese goods very expensive and we have been told that the problem would worsen further during the festive season. We do not know yet if it would be wise to wait for placing the festive orders," said Nilakantha Chaulagain, president of THTA.
The difficulty for both the traders and consumers stems mainly from the strengthening of USD and RMB by an average of 24 percent vis-a-vis Nepali rupee over the span of a year.
"On top of that, the government has raised the customs valuation of the Chinese goods, forcing us to pay more for imports," stated Chaulagain.
Given the situation, some Nepali traders have started frequenting to the major Chinese suppliers in cities like Guangzhou and Fujian provinces to purchase goods at cheaper prices to hedge against the possible drop in demand from customers in the Nepali market.
Some Chinese traders, under the stock clearance offer, have been offering around 20 percent discount on goods sold to some of the traders.
The offer, however, is limited to only few select items, said Shrestha. "As a large chunk of supplies need to be bought sans discount, goods purchased under stock clearance sale will not be able to stabilize the price," he added.
Chinese readymade garments, electrical goods, electronics, shoes and house appliances are popular in Nepal mainly because they are cheaper, thus, affordable to low and middle income groups.
Owing to their popularity, Nepal´s import from China had jumped to Rs 45.63 billion in 2010/11, whereas exports to China amounted to a meager Rs 746 million.
Nepal has been exporting only around 360 items to China even though the world´s second largest economy has provided zero tariff market access to 4,721 items to the Least Developed Countries, including Nepal.
With the growing imports from China, a large number of Nepali agents have started to base themselves in major Chinese cities to facilitate the import of goods from those cities.
"Currently about 300 Nepali agents have set up their firms in different Chinese cities to mediate between importers and suppliers. We no longer have to travel to the Chinese cities for the supplies. The agents take care of the tasks on our behalf," said Shrestha.
Nepali traders these days increasingly prefer to hire agents for placing orders and the delivery of consignments as the process has cut the cost of doing business.