China'S Textile Industry Is Seeking "Non Price Competitiveness"

Many export enterprises have begun to actively respond to the appreciation of the renminbi.

Changing the export settlement currency, collecting money in advance and raising the price of products become a relatively conventional way to avoid exchange rate risk.

With the increase of production costs and the weakening of international market demand, many foreign trade enterprises can no longer rely on labor cost advantages and compete to lower prices to get orders, instead of seeking non price competitiveness.

Over the past few days, Lu Mingqing has been very busy with his company's production line reduction.

But when it comes to this, his heart is full of anticipation.

As the general manager of Jiangyin sang Yang Garments Co., Ltd., Lu Mingqing has planned a road of pformation for enterprises in the situation of accelerating the appreciation of Renminbi and the gradual dilution of export profits this year.

The company, which has made OEM for WAL-MART and JC PENNY, will expand its international market in the coming months with its own brand of high value-added fabrics and garments.

"We are talking about some orders, and the profits must be worth looking forward to. We can not disclose specific data now."

Lu Mingqing told reporters on the phone.

The latest statistics of China Foreign Exchange Trading Center show that in July 18th, the central parity of RMB against the US dollar was 6.8238, which means that since the implementation of the RMB exchange rate reform in July 21, 2005, the RMB appreciation has reached 18.85%.

To deal with appreciation troubles

Recently, this newspaper carried out a sample survey of more than 170 foreign trade enterprises in Beijing, Shanghai, Guangdong, Shandong and Zhejiang.

The survey shows that 41.13% of the enterprises believe that the exchange rate change is still the most influential factor on exports.

In addition, changes in product price changes (22.58%) and export tax rebates and other supporting policies (19.76%) are also important factors that perplex enterprises' exports.

"We have lost a lot now, losing money every day.

10 days ago, we expected the price according to the exchange rate (RMB to us dollar) 6.83. However, according to the current exchange rate trend, we seriously underestimated the appreciation rate of RMB. "A foreign trade salesman of a chemical export enterprise in Nanjing said," we can now discuss with clients only if we can advance the negotiation of a long-term L / C, otherwise we can only take the losses ourselves. "

Since the first half of this year, the acceleration of RMB appreciation has become one of the "stumbling blocks" for exporters.

The above survey results show that the proportion of enterprises with "very large impact resulting in obvious weakening of competitiveness and significant decrease in profits" has reached 40.35% of the total number of enterprises focusing on the "impact of RMB appreciation on the export of enterprises", while 59.06% of enterprises with "influential but still controllable" are selected.

However, in the same period last year, the results of the sample survey conducted by 103 foreign trade enterprises showed that 35.29% of the enterprises that accounted for the weakening of the competitiveness of the enterprises and the obvious decrease of profits were lower than this year's level. They think that the appreciation of RMB has an impact on the export of enterprises, but the proportion of enterprises that can control them is 60.78%, which is slightly higher than this year's level.

Moreover, last year, 3.92% of enterprises chose "RMB appreciation has little impact on the export of enterprises". Only one interviewed company chose this option this year.

In fact, faced with the pressure of RMB appreciation, many export enterprises have begun to take measures to deal with them positively.

It has become a relatively conventional way to avoid exchange rate risk by changing export settlement, early collection of foreign exchange and product price increase.

"The funniest thing is that we are adjusting the price three times a day, the customers are anxious with us, but we have no way to raise the price of raw materials, so we must follow suit. The exchange rate is changing too fast."

The above mentioned foreign trade salesmen of Nanjing chemical export enterprises.

In order to get the money back as soon as possible, some foreign trade enterprises began to change the payment method, instead of the letter of credit (L/C), instead of T/T.

"We basically do not do letters of credit at present, and are mainly T/T based on old customers. In order to avoid exchange rate risks, we also increase the proportion of customers' advance payments," said Li Yan, director of export of Shandong leno import and Export Trading Co. Ltd. "the proportion of the original advance payment is 30%. Now we have increased the number of orders to 50%, minimizing the exchange rate risk of foreign exchange settlement."

This year's survey also shows that in order to cope with the appreciation of the renminbi, the most expensive option is to "settle the foreign exchange as soon as possible, collect money in advance, and collect money in advance". 32.29% of the enterprises make this choice. Secondly, 28.67% of the enterprises say that they should raise the export price to cope with the pressure of RMB appreciation.

In the survey conducted in the same period last year, the two options accounted for 37.85% and 29.94% respectively.

Seeking "non price competitiveness"

Faced with the accelerating trend of RMB appreciation this year, foreign trade enterprises have already felt the "cold current".

Production costs continue to rise and international market demand weakens.

With the influence of many internal and external troubles, foreign trade enterprises can no longer rely on labor cost advantages and competing prices to get orders, instead of seeking non price competitiveness.

Chen Yuxin, a foreign trade salesman of Zhongshan Golden Eagle Amusement Equipment Co., Ltd. in Guangdong, told our reporter: "the rising of raw materials and the appreciation of the RMB make the profits of export enterprises lower and lower. The company is upgrading products at present, and specialized R & D departments are developing and designing new products, improving the added value and competitiveness."

The survey also shows that 16.87% of the 170 foreign trade enterprises interviewed have responded to the appreciation of the renminbi by increasing production efficiency, improving product quality, technological content and added value.

Moreover, based on the corresponding measures for the expected appreciation of RMB in the next 12 months, the proportion of enterprises choosing this option has increased to 19.59%.

"Our company is developing a series of stainless steel color pots, adding a layer of ceramic to the outside of the pressure cooker, which is both warm and beautiful." a saleswoman from a stainless steel products export enterprise in Zhejiang said, "the cost price of a colored ceramic outside is about 15 yuan, and the price we sell can increase by more than 20 yuan on the original basis."

Another set of data worthy of attention is: in this survey, 26.63% of the surveyed enterprises believe that the maximum appreciation of RMB will continue to be 3% to 5% in the future. At the same time, 27.98% of enterprises say that their export products still have 3% to 5% room for raising prices, and the proportion of them is quite close.

Similar results were also obtained from questionnaires conducted during the same period last year.

At that time, more than 70% of the 103 enterprises surveyed considered that the price of export products increased by 1% to 5%, which was basically consistent with the expectation of RMB appreciation.

Xu Fei, a foreign trade salesman of Wuxi red bean Light Alloy Wheel Co., Ltd., looks at the fact that export oriented enterprises are now the only way to survive and develop in order to seek the advantage of non price competitiveness. "In the past few years, foreign trade enterprises can also say that they are prepared for the rainy day. Now that we have to get competitive advantage and get orders, we must constantly develop new products. After all, the profit of new products is higher than the average profit of the industry."

Although the profit margin of Xu Fei's export products can reach about 10%, the pace of new product development has never stopped.

"The frequency of our new product development is very high, but in the past it was mainly based on the requirements of the customers to provide new products. Now the pressure is high, the company's initiative is stronger," Xu Fei said. "On the other hand, the continuous development of new products is actually increasing the price competitiveness of exports, and the quotations can be raised."

The above Zhejiang stainless steel products export enterprises further said that at present, foreign trade enterprises are faced with factors such as raw material prices and labor costs rising, so the cost of saving can be very limited. They should consider reducing costs from the management system.

"For example, improving the management system, shortening the process and time from order to production is also an important weight to enhance the competitiveness of enterprises."

The salesman said.