Economic Integration

The Financial Times reports that a growing number of international banking institutions have begun to encourage corporations doing business in China to accept payment in local currency, instead of the US dollar or euros.

The paper last week reported  on the efforts of a number of major international banks to persuade customers to accept the renminbi, including Citigroup and JPMorgan.  HSBC has moved its chief executive officer from London to Hong Kong in support of the effort. That bank, along with Standard Chartered also have begun to provide a number of financial incentives to companies that agree to settle their trades in the renminbi.

A year ago, China introduced a pilot project for companies to use the renminbi outside the country.  Initially, only a small number of Asian nations were included, but Beijing has subsequently expanded it worldwide.

Since China has become the world’s second largest economy, banks are moving to establish their place in the Chinese market and take advantage of its expanding economic influence.  The Financial Times reported that the Hong Kong special administrative region will be the focal point for offshore transactions in the renminbi. 

Questions:  What are the implications to the global cotton supply chain if more companies adopt a renminbi settlement?

Is this something more companies should consider?

How would it affect your company’s operations?

The following report from just-style.com details a forum at last week's Outdoor Retailer trade show in Salt Lake City, Utah, where participants discussed the supply chain under the title  'Returning to America'. 

“Moderator Mike Todaro, managing director of the AAPNetwork, a non-profit supply chain network with members worldwide, opened the session by looking at the question 'where is sourcing going?' Here are some of his thoughts.

• Before we discuss whether sourcing is returning to the US, you need to know what never left and what will never return, and why. If you think there is going to be a significant return, let me tell you no-one is going to put Humpty Dumpty back together again. When industries left the US, some links in the supply chain were decimated.
• There is only one story in this industry and any other industry and it is a supply chain story. Every industry, every country and definitely every company competes as a supply chain. Every product you see, every article of clothing you are wearing now is the result of a supply chain and it is far more extensive and complicated than you may think.
• Every significant act of leadership, every project, all answers come from meeting as supply chains. Whether it be balanced sourcing, product development, cycle times, private label, risk assessment, raw materials, social responsibility or, most recently, sustainability, you get to the issues and answers as a chain.
• There are three aspects to business that work better when you do them as a chain. First is making money. In our experience, it is not 'do we have good trade laws,' it's 'are you making money?'.  Profit today seems to be coming from those who are dramatically cutting costs, not increasing revenues. And the claim 'it costs too much' usually comes from those who don't know the REAL costs.
• Second, building relationships. Too many people look for the big meeting with the most powerful CEO. But relationships are not big game hunting, they're more like farming, cultivating them over time.
• And finally, knowing the real costs. That's where we are today. So many have chased the low cost needle to the furthest ends of the earth and have finally hit a wall. Rising wages, strikes, shipping costs, red tape, lack of social responsibility, activism, weather and other factors are in fact causing many to rethink their sourcing strategy, or more frankly, to develop a strategy where before there were only tactics.
• And that brings us to 'sustainability'. We see in the news that commitment to eco causes and sustainability has never been more top down. It means you now have to balance protecting your profit with promoting your proactivity.
• We define sustainability to include environmental, social and economic elements. And what retailers are realizing, is they can outsource sourcing, accounting, design, logistics, HR and more, but they can't outsource accountability. As one learns in the military, you can delegate authority but not responsibility.
• Walmart admit 92% of the actions they need to take are with their vendors, in their supply chain. But could it be that 92% of the obstacles their suppliers face are within Walmart itself? As we have broken down silos in the supply chain, are there silos within retailers that need to be tipped? Are their measurements right?
• Can you reward one staff for finding the lowest price and incentivise another for finding the lowest carbon footprint? We know retail is looking for answers. They are buying what we as a supply chain are selling. It's a top down program that requires more bottoms-up support than ever before, by us, the chain, the ones with feet on the ground all around the world.”

Questions:  Which sourcing sectors (links) in the cotton, textile and apparel supply chain have move out of the US?  What factors contributed to the loss?

Which of these are the most important to a sound domestic industry?

What is the possibility of any of the lost sectors returning to the US?