China Car Times

Jack Perkowski is the chairman and CEO of ASIMCO, a leading Chinese auto parts manufacturer, and the author of Managing the Dragon: How I’m Building a Billion Dollar Business in China. He left Wall Street in 1990 to make his fortune in China and has been an iconic figure in the western business community in China ever since. Nicknamed Mr. China due to his appearance as a central character in a 2005 book of the same name by Tim Clissold, Perkowski’s unbounded enthusiasm for the economic potential of the Middle Kingdom is legendary. As The China Perspective discovers, rising prices in China and an unsettled global market have done nothing to dim that enthusiasm.

In Chapter 13 of your book Managing the Dragon you talk about the need to keep costs low to benefit from China’s low-cost manufacturing base as well as to be able to compete with local firms. With the recent rise in commodity prices, increasing wage inflation and the increase in value of the RMB, how much harder is this becoming and how has this affected your overall operations and business strategy?

We first need to separate costs that effect all operations alike, wherever they are located; those that are unique to operations in China; and those that only have an impact on a product’s export competitiveness. For example, rising commodity costs affect manufacturers everywhere, not just those in China, so ASIMCO’s operations are not necessarily impacted negatively versus other Chinese or foreign manufacturers. A rising yuan will have an impact on export sales, but because local sales are made in RMB, will have no impact on our local business.

Since 85 percent of ASIMCO’s sales are made in China, a rising RMB actually has a very positive impact on our operations. As the yuan appreciates against the US dollar, all of our assets in China are worth more in terms of dollars; any dollar denominated debt that we owe can be paid back with a smaller amount of RMB; any imported equipment or raw materials that we use cost us less; and every RMB we collect from our customers can be exchanged for more dollars. For those products that we export to the United States, we now insist on currency adjustments. If we don’t get that provision, we simply don’t export.

You can read the rest of the interesting interview over on The China Perspective.