A buyer who has ordered twice from the same Chinese supplier will sometimes describe the second quotation as a betrayal. Nothing about the product changed. The specification was the same. The quantity was the same or better and the relationship had been good. Yet the unit price came back higher and the explanation offered was thin. From the buyer’s side this reads as a supplier who has worked out that the account is now captive and has decided to find out how captive.

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I work on the supply side of this, in Yiwu, and the same event looks different from here. A good share of the time that second quotation is not an increase. It is a correction, and what is being corrected is a currency loss the supplier already ate once without telling anyone.

The mechanic is ordinary and it is almost never visible in the paperwork. The quotation goes out in dollars because that is what the buyer asked for. The supplier’s own world is priced in renminbi. He pays his material deposit at home. He pays his workers and his electricity at home too, in home currency. So the dollar figure he sends is a translation of a cost he carries in another unit, fixed on the day he made it. Between the day that quotation is issued and the day money actually clears, the rate moves. It always moves. Sometimes it moves his way and he says nothing, which is the part buyers never hear about either.

On a first order the movement is usually small in absolute terms, and the supplier absorbs it. This is not generosity and it is not incompetence. Reopening a price is socially expensive in a way that is easy to underestimate from outside. The negotiation closed a week ago and both sides shook hands on it. Going back now to say the number has changed makes him look disorganised or opportunistic at the exact moment he is trying to look like neither. He would rather carry the difference and keep the customer. So he carries it, and the buyer never learns that anything happened.

By the time the second order comes round the amount is no longer theoretical. He has a figure. He knows what the last run actually returned once payment cleared, and he prices the new one so that it does not happen again. Often he also adds a little padding, because the only lesson he drew from the first order was that he had been exposed and had no way to talk about it. He rarely explains any of this. Partly that is because explaining means opening with an admission that he mispriced. Partly it is because a technical conversation about currency, conducted in his second language, with a customer he does not want to alarm, is a conversation almost nobody chooses to start.

So the buyer receives a higher number with no reason attached, and fills in the reason himself. The one he fills in is almost always about character. The supplier got greedy. The supplier saw the reorder and squeezed. That conclusion then does what conclusions about character do, which is to end the relationship rather than open a discussion. The buyer goes looking for a replacement. That replacement quotes fresh and wins the business. It then absorbs the same invisible loss on the first run and corrects it on the second. After three or four cycles of this the buyer has formed a general view that prices from China drift upward once you are locked in. What has actually been built is a machine for paying the same first-order premium over and over to a series of strangers, while losing the one supplier who had already learned how to make the product properly.

None of this requires anyone to behave badly. That is what makes it durable. Both parties act reasonably at every step and still arrive somewhere neither wanted.

The repair is unglamorous and it happens at the purchase order, not in the argument afterwards. What is missing from most orders is any statement of what the price is made of. A quotation in dollars looks like a price in dollars, when it is really a price in renminbi wearing a dollar coat, and the two behave differently over time. Writing down which currency the figure was derived in costs nothing and changes what both sides are able to say later. If a reference rate sat behind the quotation, that reference belongs on the document as well, because a number nobody recorded cannot be pointed at when it matters. And it is worth agreeing in advance how much movement the two of you intend to ignore, so that there is a difference between a rate that wandered and a rate that broke the assumption the price was built on.

I am not recommending hedging instruments here and I am not going to put a rate in this article. Hedging belongs to a finance function that can see the exposure of the whole book. Any figure printed today would be wrong by the time you read it. What is left is a smaller claim. An unstated currency basis turns an arithmetic problem into a character problem, and character problems do not get resolved by email.

There is a second benefit that buyers tend to notice only after they try it. Ask a supplier early and without accusation what currency his cost sits in. He will usually just tell you. The answer gives you something the price does not. Some of them import their own inputs and carry an exposure of their own underneath yours. Some have quoted internationally for years while others are translating for the first time. A supplier who has never thought about it is not a bad supplier. He is one whose second quotation you should expect to move. Now you will know why when it does.

The conversation takes ten minutes and it is much easier to have while both sides are still pleased with each other. It is nearly impossible to have after a revised quotation has already been read as an insult.

Liam Cai is the founder of Supplymo (https://supplymo.com) and runs sourcing and quality control in Yiwu, China, for overseas buyers.