Subprime Lending Jeopardize China's Textile And Garment Export Industry

How long will it take to get the goods sent out and tens of millions of dollars?

The US subprime mortgage crisis has already affected some of China's export textile and garment enterprises.

Due to the credit crunch brought by the subprime mortgage crisis and oversupply of the European and American markets, the dealers in the US, Hongkong and Europe have been affected, and their stern business environment is being pmitted to the middle and upper reaches of the domestic manufacturing industry through different ways. The most unwanted overseas arrears happened by local manufacturing enterprises are frequent.

US businesses frequently hit new highs in recent years.

China Export and Credit Insurance Corp learned that the first quarter of this year, the company received a total of 4 buyers risk cases, involving up to 27 million 240 thousand yuan.

"This amount is equivalent to the amount we paid last year."

Xiang Yu, director of China credit insurance office in Dongguan, said.

These reports relate to the largest number of importers in the United States.

The total amount of a US buyer's arrears reached US $1 million 300 thousand, which may become the most significant claim case of China's credit insurance company in recent years.

China Export and Credit Insurance Corp is the only policy financial institution to undertake export credit insurance business in China. According to the person concerned, the United States importers are concentrating on risks, and the natural and subprime mortgage crisis is irrelevant.

According to the analysis, due to the multiple factors such as the subprime mortgage crisis, the rise in crude oil prices and the continued depreciation of the US dollar, the recent economic growth in the United States is weak, the inflation rate is rising, the decline of the real estate and related industries is declining, and it continues to spread to other industries, which eventually leads to the decline in the external payment ability of the US enterprises, the slower payment rate and the higher default rate.

"I don't expect interest or compensation. I'll pay the $320 thousand I owe."

According to Mr. Lin, a clothing manufacturer in Zhejiang.

An American customer has delayed payment since October last year and has accumulated to $320 thousand.

"Long term cooperation, this person is still very cool, the key is that things can not sell."

Lin Guojun said he went to the United States last month and asked for money around the half of the earth, and eventually returned empty handed.

Mr. Lin's experience is quite typical in this year's export textile enterprises.

Moreover, because of the increasing uncertainty in the foreign trade environment, many PRD enterprises have been afraid to take orders from the second half of last year, or split the big ones into small ones and long ones into rolling short lists to avoid the risks of the US dollar's devaluation to the RMB.

Subprime lending spreads to textile bases

Binzhou, Shandong, is China's "capital of cotton textiles". Textiles are its main export commodities.

In the first quarter of 2008, a total of 5000 textile exports were valued at US $348 million, an increase of 1.03% and 30.23% over the same period last year, and exports accounted for the first place in Shandong.

However, the impact of the subprime mortgage crisis, the appreciation of the RMB against the US dollar and the rise of internal production costs has made the local textile enterprises face a severe test.

First, the decline in US consumption directly leads to a decline in demand for imports; the two is the US recession and the pressure on trade protectionism; the "made in China" faces more barriers to trade protectionism, which will weaken the competitiveness of China's textile exports; three, the global economy is dragged down by the United States and further decline. Under the background of worsening external economic environment, China's export growth to the main trading partners such as the EU will also face downside risks.

The appreciation of the RMB against the US dollar has not only brought the direct exchange loss to the textile enterprises, but also compressed the profit margins of the textile enterprises and weakened the price advantage of the export products.

According to the calculation of the relevant departments, the sales profit of the clothing industry will drop by 1% to 4% every 1% appreciation.

Affected by these negative factors, the profit margin of textile industry has declined this year. Most export textile enterprises have increased inventory, overloaded products, and reduced orders. Some small and medium-sized textile enterprises are in a state of small profits or losses, and even a few enterprises have stopped production.

According to the statistics of the national development and Reform Commission, the export value of textile industry in the first quarter of this year was 162 billion 600 million yuan, an increase of 11.1%, but the growth rate dropped by 4.8 percentage points over the same period.

It is reported that the export volume of Guangdong, the largest province of foreign trade, is lower than that of the whole country, with exports of textiles, clothing and shoes dropping sharply.

And some enterprises in Keqiao, Jiangsu began to regard this year as the bottom line of "dead support". If the foreign trade situation is still not improved by the end of this year, enterprises will have to shut down or switch to production because of no profit.

"We have felt the impact of the subprime crisis."

Li Yue, who is responsible for the US market operation in Jiangsu Shun Tian Tai Ke Garments Co., Ltd., at present, American Importers are very sensitive to price and take an unprecedented strategy of tight procurement.

Not only is the old product free from the increase, but the new product is also difficult to raise the price.

Li Yue said that many of his friends in the industry felt enormous pressure and order risks.

"If the panic of subprime crisis can not be dispersed for a long time, many small and medium-sized textile export enterprises will be faced with survival difficulties."

Avoiding risks and seeking emergency measures everywhere

It is understood that with the shrinking of the overseas consumer market this year and the uncertainty of foreign trade, local manufacturers are more rational and cautious in choosing partners.

"The more you do this, the less anxious you will be."

"The oversupply of orders and the reduction of orders are things that we all encounter, but we must not risk the risk of a short term order, for example, to promise the other side of the unconventional payment method and time," said the head of the Dongguan Luen Thai textile mill.

This is also a curse for future misunderstandings. "

In this regard, many industrial clusters have adopted their own methods.

For example, some enterprises in Dongguan have adopted the way of buying export credit insurance for export textiles.

There are also a number of companies that have attached the exemption risk clause when signing contracts with American customers.

It is clearly stated that the order after June will be on the FOB price requirement, that is, the buyer will be responsible for the next thing after loading the goods.

Such as Shanshan import and Export Co., Ltd. put forward after 6, July, the risk of all exports can not be borne by the European and American textile buyers.

In addition, some financial experts have suggested that locking in exchange rate hedging, letter of credit pledged loans ahead of time settlement, and using non US dollar settlement are also effective ways to avoid risks or to pfer export risks.

For example, some banks launched