Zhejiang Pinghu Enterprises Have Strategies To Avoid Foreign Trade Risks

Recently, the euro dollar debt crisis has affected the US dollar to Euro ratio, and the renminbi has appreciated more than 10% against the US dollar. It has hit a new high in 5 years after breaking through the 6.8 barrier. With the fluctuation of RMB's "high price", cross border trade settlement pilot projects and exchange rate reform new policies and other measures have also been introduced. For this reason, many export oriented enterprises in Jiaxing clothing, bags, hardware and so on have adopted "Wu Yi" to evade single risks, and at the same time reduce the loss and maximize the profit margins.

OEM processing brand domestic sales

During the interview, many garment processing enterprises said that the exchange rate was 6.85 at first when they signed contracts with foreign merchants, when the amount was 1 million dollars, so that enterprises could get 6 million 850 thousand yuan according to the exchange rate at that time. But when the time of delivery, the RMB exchange rate has become 6.8, so that the actual amount of money that the enterprise can get will turn into 6 million 800 thousand yuan, and the change of exchange rate will make the enterprise lose 50 thousand yuan on the ground.

Wang Weijia, chairman of Zhejiang IIF Textile Co., Ltd. told me that although the size and order of this year need not worry, but since the company's external processing OEM production game, especially since this year, clothing exported to the United States has been led by the dollar. In the unstable situation of foreign trade processing profit margins, IIF has gradually increased the production and sales volume of its own brand "ijialin" since this year. "Increasing domestic sales can not only avoid risks, but also carry out brand management and kill two birds with one stone." Wang Weijia said the company plans to open brand stores in Jiaxing, Shaoxing, Suzhou and other places in the second half of the year, and strive to make domestic output value account for 30% of the total output value by the end of the year.

Currency swap agreement to lock in the exchange rate

"The profit margins of foreign trade enterprises are generally low, and the fluctuation of exchange rate often brings great losses." General manager of several luggage enterprises in new Dai town said that the euro fell and the appreciation of the RMB continued to revolve around the US dollar. It was more prudent for enterprises to choose loans in US dollars, and signed a long-term exchange agreement with the renminbi through US dollar loans, thereby avoiding exchange rate risks, locking transaction costs and improving enterprise's ability to resist risks and profitability.

The relevant professionals of the Pinghu branch of the Bank of China have also reminded entrepreneurs that the RMB exchange rate will undergo a new mechanism reform in the near future, and that the US dollar swap agreement will be reestablished. The RMB exchange rate peg to the US dollar may change over the past year, which is a risk for US dollar holding enterprises. Once the renminbi rises against the US dollar, their dollar will be depreciated.

Cross border trade is also feasible for RMB settlement.

　　 RMB appreciation RMB settlement is a good choice to avoid risks in the export business. Pinghu Fang Fa Hardware Co., Ltd., located in Jiaxing Lake Street, is a small enterprise. All the hardware products such as nuts, screws and so on are exported. Because the production cycle is relatively long, the exchange rate between the contract and the payment tends to vary greatly. Li Genfa, general manager of the company, told the author that some small country customers in Western Asia and South America agreed to use RMB to settle accounts, which ensured the relative stability of the foreign trade profits of the company.

During the interview, the heads of export enterprises in many garments, bags, hardware and other industries in Jiaxing also indicated that RMB settlement is feasible. Regarding this, Qian Lianghua, director of the foreign trade and Economic Cooperation Bureau, believes that the demand for RMB settlement by foreign trade enterprises is bound to be great. Under the current situation of financial crisis, cross-border trade RMB settlement can reduce transaction costs and maintain steady growth of foreign trade, but to a large extent, it depends on the outcome of negotiations and coordination in trade.