When the world's biggest retailer Wal-Mart imports commodities from China, the third largest trading nation in the world, even the US dollar feels the pressure. The procurement has broad influence, ranging from the price of plastic ornaments for the Santa Clause to international monetary policy.

By some indexes, Wal-Mart is currently the world's biggest retailer. In terms of procurement value, there is unique relationship between Wal-Mart and China. Some media rank Wal-Mart the eighth trading partner for China, followed by Russia and Britain. The influence of the trade has expanded from the retail sector to political arena. Top government leaders in North America, Europe, Asia and every corner of the world all have some idea about this.

However, since Wal-Mart only imports commodities from China, without manufacturing any products that can be exported, the colossal procurement made by the company accounts for more than 10 percent in the total commodities imported by the U.S. from China. That is one of the causes leading to trade deficit on the part of U.S. The important influence thus generated has expanded from the retail field to other areas

According to Wal-Mart spokesman Amy Wyatt, in fiscal year 2003 that ended on January 31, 2004, Wal-Mart imported commodities worth a total of US$15 billion, with direct procurement and procurement through suppliers taking up 50 percent each. In fiscal year 2003, Wal-Mart's net sales revenue hit US$256 billion, in which US$209 billion came from the US market. That is not a small figure. It is unnegligible even in the foreign exchange market, where there are huge amounts of funds. In the debates on US trade deficit and China's foreign exchange policy, it is also a very important factor.
 
The chain starts when American consumers go on a shopping spree at Wal-Mart for toys, electronic products and apparel. China's exports to US are 6.5 times its imports from the latter. As a result, China's foreign exchange keeps increasing.

Yet instead of putting the huge amounts of US dollars in the national treasury, China's central bank purchases US Treasuries. This is an important measure to preserve the stability of the exchange rate of Renminbi. At the same time, it helps keep price and interest rate stable in the U.S. Thus, the American middle class may continue to enjoy shopping spree in Wal-Mart stores.

This also holds important significance to China: exports have made major contribution to the growth of China's GDP.
 
Other countries have felt the influence of the massive procurement made by Wal-Mart from China. As the exchange rate of Renminbi remains stable, Japan and South Korea have to push down the exchange rate of their home currencies to US dollar, because they do not want to see their export commodities' competitiveness weaken as their currencies appreciate.

Thus, Euro bears the pressure of weak dollar. To many people, depreciation of US dollar is an inevitable way for the U.S. to improve its balance of international payment. This sparkles dissatisfaction on the part of Euroland exporters and politicians.

One company's procurement behavior affects the fluctuations in the international foreign exchange market, especially the exchange rate of yen to US dollar at all. It is quite a feat per se. Yet the implications of Wal-Mart's procurement of Chinese commodities go beyond this. Productivity, job opportunities, consumer expenditure mode, and even the political field in the U.S. are subject to this influence.
 
Although the exchange rate of Renminbi and Chinese export commodities did not become a major topic during the US general elections in 2004, many influential politicians and business groups require the US government to work on Renminbi and US-China trade issues. In some areas in U.S., local retail trade keep criticizing Wal-Mart's procurement mode.

Certainly, among American retailers, Wal-Mart is not alone in importing goods from China. The criticism on Wal-Mart does not focus on the import only. For a long time, Chinese enterprises can get into the US market without building up their own brands, which gives them an enormous advantage. When they come shopping at Wal-Mart stores, American consumers purchase the commodities without hesitation as long as the price is low, even if they have never heard of the brands.

That is the core of Wal-Mart's business strategy of "everyday low prices". In cooperating with Wal-Mart, Chinese manufacturers have learned the experience of competing with price, instead of competing with brands. It will do them good when they tap new overseas markets and reinforce the huge domestic consumer market.