It’s common to hear U.S. politicians and economists accuse China of manipulating its currency. The gist of the accusation is that China keeps its currency—the yuan—artificially low compared to the U.S. dollar. This makes Chinese goods cheaper to buy in America, helping China maintain a trade surplus with the U.S.
At first glance, this may sound like a disadvantage for the U.S. economy. But what if this same strategy actually creates business opportunities—especially for small businesses?
Let’s unpack how China’s currency manipulation works, why it continues, and how savvy entrepreneurs can use it to their advantage—as long as tariffs don’t get in the way.
Understanding Currency Manipulation in Simple Terms
When a country’s currency is weak compared to others, its exports become cheaper on the global market. In China’s case, this means that when the yuan stays low, Chinese-made goods and services remain attractively priced for U.S. buyers. This benefits Chinese manufacturers, helps China employ its vast workforce, and supports economic stability within the country—especially important for a communist regime whose legitimacy is tied to full employment and social harmony.
By contrast, if the yuan were allowed to float freely and rise in value, Chinese goods would become more expensive in the U.S. American consumers would likely buy fewer of them. This could reduce China’s trade surplus—but it would also potentially disrupt the employment of millions of workers in Chinese factories.
In essence, China keeps its currency low to remain the “workshop of the world.”
The Hidden Benefit to the American Consumer
Oddly enough, this practice benefits American consumers in a direct way. With cheaper Chinese goods flooding the market, everything from electronics to clothing becomes more affordable. This frees up disposable income for Americans to spend on other things—restaurants, services, housing, or savings. In the short term, a lower yuan means Americans enjoy a higher standard of living by getting more for their money.
But what does this mean for U.S. entrepreneurs?
An Opportunity for Small Businesses: Outsourcing and Arbitrage
While most headlines focus on how multinational corporations outsource manufacturing to China, small businesses can also tap into this global labor market. Thanks to digital platforms like Upwork, Fiverr, and Guru, small businesses can access low-cost, skilled labor in China (and other low-wage countries) without having to own factories or employ full-time staff.
Here are a few ways to leverage this:
Product manufacturing: You can contract with Chinese factories to produce private-label products at lower costs. Sites like Alibaba or GlobalSources connect you directly to suppliers.
Software development: Many small software businesses use Chinese or Southeast Asian developers to build apps or websites at a fraction of the U.S. cost.
Design and digital services: Freelancers in China offer services such as graphic design, video editing, CAD modeling, and more—often for 30–70% less than American counterparts.
This is called labor arbitrage—when businesses exploit wage differentials between countries to improve margins. Thanks to China’s currency policy, these labor costs stay low relative to U.S. wages.
But there’s a catch: this arbitrage only works when tariffs aren’t imposed on Chinese imports.
Tariffs Can Cancel Out the Advantage
If the U.S. imposes tariffs on goods made in China, those tariffs can raise prices to a point where the cost advantage disappears. For example, if a 25% tariff is levied on imported electronics, it may no longer be cheaper to manufacture those items in China than in another low-cost country—or even in the U.S. with automation.
So, while China’s currency manipulation creates pricing advantages, those benefits can be undone quickly by trade policy. That’s why savvy small business owners must monitor not just foreign exchange rates but also tariff changes before making long-term outsourcing decisions.
The Global Talent Pool Is Open to Everyone
One of the misconceptions is that outsourcing is only for big companies. The truth is, platforms like Upwork, Freelancer, and Fiverr have democratized global labor. A solopreneur running a dropshipping business from their basement can now hire a team of designers, copywriters, and product researchers from across the globe.
Many Chinese professionals are highly educated and motivated. By working with them directly, you’re gaining access to a labor pool that used to be out of reach just a decade ago. And since China keeps the yuan weak, the dollar stretches further when you hire workers there—again, assuming tariffs don’t erode your margins.
The Bigger Picture: A Two-Way Trade
Of course, there’s a flip side. If the yuan were allowed to rise in value, U.S. exports would become cheaper for Chinese buyers. That could, in theory, create jobs in U.S. industries that appeal to Chinese consumers—luxury goods, education, tourism, agriculture, etc. However, for that to happen, Chinese consumers must want and afford these American products.
Right now, China is focused on industrial production and employment, not on boosting its citizens’ foreign spending. That’s why it’s likely to continue suppressing the yuan’s value—and why this economic situation is likely to persist unless trade wars disrupt the balance.
So, How Can You Use This to Your Advantage?
Start by asking:
Could I get products made overseas for a lower cost—tariff-free?
Are there tasks I currently do that could be outsourced to lower-cost labor in China?
Could I build a business that arbitrages low-cost Chinese production and sells at higher prices in the U.S. without triggering import duties?
Outsourcing is no longer a strategy just for Fortune 500 companies. It’s a tool in your toolbox, made even more valuable thanks to China’s monetary policy—but only when tariffs stay low.
How can your business take advantage of global cost differences to stay competitive and increase profitability?
