Small Business

Here's how the yuan fall impacts small business

Yuan’s slide may help some small businesses

Investors and big businesses alike are watching closely as the People's Bank of China has devalued the nation's currency for a third straight day. But so, too, are some small U.S. businesses that engage in trade with China.

Smaller importers and exporters can be sensitive to currency swings, as they typically have fewer resources to handle the impact.

In the case of a stronger dollar, "Made in America" exporters get slammed, with trade partners looking for cheaper deals. But with a weakened , facing a currency slide that approached 2 percent Wednesday before stabilizing Thursday, small-business importer Raymond Arth may be positioned to benefit.

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Arth is manager of the Phoenix Faucet division of Valterra Products. Valterra recently acquired Phoenix, and the two companies are both small businesses.

Phoenix is based in Avon Lake, Ohio, and both manufactures and imports plastic faucets and plumbing accessories from China. Arth said about 40 percent of Phoenix's gross sales revenue is derived from imported products.

Raymond Arth, manager of the Phoenix Faucets division of Valterra Products.
Reid Riddell | CNBC

"This is just further evidence of weakening in the Chinese economy, which I think will create more leverage for us in terms of our Chinese partners to be more aggressive with pricing," he said. "We will have the ability to negotiate."

Trade prices are negotiated in U.S. dollars, with a currency band on either side, so Arth says his current contracts will not be altered. But if he were to enter into a new deal amid the weakened yuan, he would be poised to save.

For importers of Chinese products, a continued slide will be beneficial, said Molly Day, vice president of public affairs at the National Small Business Association, a Washington, D.C.-based advocacy group.

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"They can purchase more products and services cheaper, not just from China, but even other surrounding countries. Their primary competitors in the region will face downward pressure," Day said.

But there's also the chance that a continued weakened yuan puts a further dent in Made in America manufacturing.

"If you are being undercut significantly by foreign competitors in terms of labor costs and wage rules that we have here in America, there is a challenge to compete with Chinese companies for small businesses—this won't help them," Day said.

That is something about the yuan depreciation that concerns Arth, putting the business in the unusual situation of actually competing with itself. About 60 percent of Phoenix's sales revenue comes from product lines the company manufactures in the U.S.

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"On the good side, I can acquire new products at a lower price," he said. "But, the price gap of what I manufacture here in the U.S. and what I import makes my imported products more attractive to my U.S. partners, because they represent my lowest price point."

Moving more business overseas isn't ideal, as Arth's Phoenix is one of the few companies in the country still producing plastic faucets in America.

"We were dragged kicking and screaming to China, and were one of the last holdouts," he said.