This document summarizes a discussion on the potential impacts of China allowing the Yuan to float based on market forces rather than being government controlled. It notes that in the long run this could benefit Western economies by increasing Chinese purchases of US and European assets and technologies. However, it also warns that US companies may become more reliant on China for revenue and there could be a flight of skilled US workers to China. Western companies are advised to prepare for different relationship and logistical expectations from Chinese customers. Overall China's influence will likely increase in developing markets while still protecting its own borders and interests.

1. A Friendly forum discussing challenging topics facing western
companies doing business with China
Section on Yuan Valuation and potential impact
Bill Kohnen
Forum Roundtable Discussion Notes

2. The calls for China to base Yuan value on
market will have broad long-term impact on
Western Economies with consequences not
obvious to those basing drive on emotion and
politics.

3. Why

 Higher value Yuan means more Purchases by China
of US and European assets
 More influence in developing countries
 Lowers cost of purchase for key technologies to
bring Chinese economy to next level
 US companies will become more reliant on China for
revenue. Short term gain – long term risk
 Potential flight of US skilled workers to China
 We just made many Chinese millionaires even richer

4. Who will it benefit

 Luxury brand items
 High end technology makers – near term
 US and European tourist business
 Those selling assets to China
 More money available to influence decision makers
in Western Politics, Education,Business etc..

5. China based companies as customers
Are you ready?

 Net 180 payment terms
 Contracts that are viewed as mere guidelines for
discussion
 On call demand for contacts
 Cost pressure as not felt before from US customers
 Relationship expectations different than US
customers
 Logistics issues are your issue
 Political pressures on both sides

6. It will and is happening
What to look for?

 Additional buying power will make commodity
purchases outside of China easier thus creating more
scarcity for others – ultimately further driving up
prices.
 Prepare Sales Teams for more requests from
potential China based customers. Those that are
prepared will get more than share of initial orders
 Start now to facilitate payments in Yuan
 This will be different than the occasion payment in
Euro or Yen – ultimately though it could be easier

7. What to look for continued

 Influence of China will increase in developing
markets and third world.

8. Still basic truths about China remain
that should be remember for context

 China is ultimately does not have direct expansion goals
 China protects its boarders and want “space” to keep
from being boxed in.
 China still will look to influence and work with others
outside only where there is a direct benefit back to China
 China will continue to be sensitive to attempts at outside
influence on political, social, and government matters
 Even with great differences China is open to dialogue
 Despite a view often based on a 100 year time line when
pushed China can move dramatically fast to bring order