Falling yuan holds no real fear for Goldlion

Kenneth Ko

GOLDLION Holdings has maintained substantial growth in sales to China despite the devaluation of the yuan last year, says chairman Tsang Hin-chi.

In a bid to allay fears of the depreciating yuan's negative impact on the company, Mr Tsang said Goldlion had come out comfortably in handling the problem.

He said it managed to register strong growth in sales through price increases and the introduction of new products, which had substantially offset the depreciating yuan's impact.

For the year ended December 1992, it is estimated that its mainland subsidiary Silverlion, which receives revenue in yuan, registered a profit of more than 40 million yuan (about HK$53 million) on a turnover of around 260 million yuan.

The performance was much better than earnings of 10.73 million yuan and sales of 110 million yuan for the previous year, despite the yuan's devaluation.

''We foresaw the problem of the yuan's gradual depreciation, so we have made appropriate price adjustments to offset the effect,'' Mr Tsang said.

''Even if the yuan is to depreciate 20 or 30 per cent, we are always ahead of the currency's depreciation.'' China now accounted for more than half of Goldlion's total turnover, and the group intended to increase its exposure to the mainland market, he said.

He said Goldlion had earmarked 30 million yuan for advertising costs in China this year to promote its products.

He also said it had recently signed deals to open Goldlion specialty stores in Beijing, Nanjing, Tianjin, Suzhou, Guangzhou, Shenzhen, Wuhan and Guilin. However, the plans have yet to be approved by local governments.

Mr Tsang plans to visit Shanghai later this month to identify suitable sites for the setting up of a wholesale centre in the city.

Meanwhile, Chuang's China Investment senior manager Kelvin Wong said the yuan's devaluation would have very little adverse impact on his company's mainland business.

Because about 95 per cent of the products manufactured by the company are exported, while salaries are paid in yuan, the devaluation may even bring about a rise in operating profit.

On other business such as property development and construction, Mr Wong said that as these investments largely involved yuan, the currency's devaluation would have no impact.