If you have been following the news recently, even remotely, you probably know that the Yuan (or RMB, Chinese currency) is undergoing a strong revaluation. Wow, ground breaking news eh? What does this have to do with anything? Why is this being posted on GBAtemp of all places? I think it's time for a very basic lesson of economy. To put it simply, China produces a lot of stuff. From clothes to electronics, from watches to cigarettes, from shoes to... flashcarts. It is no secret that most-- if not all flashcart teams are located in China: R4, Supercard, Acekard, and so on. But how does a flashcart go all the way from the factory down to the bottom of your Nintendo DS cartridge slot? Well, there's obviously a middle-man: the resellers. The best example would be ShopTemp, GBAtemp's partner shop. They purchase goods (in bulk orders, rarely less than 100pcs at a time!) from factories in various places of China, and sell them online to customers all around the world. And that's where trouble comes in. Resellers like ShopTemp and all other shops that sell products manufactured in China have to purchase stock with the local currency: the Yuan. Local factories aren't interested in foreign currencies, they need to pay for the material and salaries with the local currency. On the other hand, since retailers sell those products to people worldwide, they don't get paid in Yuan but in US Dollars. You pay $35 for the Supercard DSTWO no matter what the currency exchange rates are, that is none of your concern. To summarize: 100% of retailers income is in USD, and 100% of their expenses are in CNY (Chinese Yuan). Consequently retailers have to convert money from USD to CNY in order to be able to purchase stock and shipment services, to pay for salaries and warehouse costs. Now what happens in the Yuan is revaluated? What happens if the local currency gets stronger? Let's do some basic math using virtual figures. - Monthly income: $10,000 (USD). - Monthly expenses: ¥60,000 (CNY). The exchange rate used to be nearly 7 CNY for 1 USD. The Yuan was very weak at the time, with 1 dollar you could get as much as 7 Yuan, with which you can get 3 or 4 cans of Coca-cola over here in China. This implied that there was enough income to cover expenses: 70,000 CNY (10,000 USD converted to CNY). But since the revaluation, the US dollar has dropped down to 6.69 CNY for 1 USD. Income has consequently dropped down to 66,900 CNY. This revaluation is extremely sudden, the Yuan has been getting stronger and stronger over the past few days. The dollar is losing almost 0.01 point every day. Which means at this rate in 10 days, 1 USD will be worth 6.59 RMB. In 100 days, 1 dollar will be worth 5.69 RMB. In this scenario, converting your income of 10,000 USD into the Chinese currency won't be enough to cover your expenses: 56,900 CNY while you need 60,000. What happens in that case? There will be two major effects. The first and most direct consequence is that retailers that rely on Chinese production will have no other choice than to increase their prices if they don't want to go bankrupt. Prices will most defintely be increasing from now on. Even retailers like DealExtreme who have been selling products at a very competitive price with extremely low profit margin will have no other choice than to see their prices rising. It won't be a massive increase, but we're talking about a few dollars per product. The second and indirect effect could be positive for the economies of Western countries. Instead of importing goods from China, which is a practice that will become more and more expensive due to not just the CNY revaluation but also because of the price of oil/petrol, companies and businesses will tend to prefer purchasing goods in their own country. Local production could be redynamized and unemployment rates should fall. That's all there is to say at the moment, if the Chinese Yuan keeps getting stronger we will soon be seeing prices rising on many shops. There is more than meets the eye: this is just a very basic and partial explanation of select consequences, if you are interested in the subject I encourage you to read newspaper articles about it, and to inform yourself. Economy is a vast subject.