Shoe Enterprises AOKANG Euro Settlement To Deal With "Currency War"

On October 16th, Zhejiang's AOKANG shoe Limited by Share Ltd, China's largest private shoe manufacturer, is due to the escalating currency war.

The final result of the EU High Court's anti-dumping case has not yet come out, and the depreciation of the US dollar has made AOKANG another important export.

This is not AOKANG's first big export war.

AOKANG spokesman Wang Hailong said that in 2003, AOKANG's exports maintained an annual growth rate of 200%-300%, mainly in Italy and other Western European regions.

But after the EU began anti-dumping in 2006, the export growth rate dropped sharply, and new customers were also hard to develop.

The lawsuit dragged on for four years and still had no result.

Over the years, in view of the changing international trade situation, AOKANG has been looking for countermeasures, and has launched related mergers and acquisitions to break through.

Li Haijun said he particularly hoped that the government could introduce measures to curb currency wars as soon as possible, and that the exchange rate could restore stability as soon as possible.

Dollar "barrier"

In the past September, the yuan rose to 1.74% against the US dollar, the biggest monthly gain since the reform.

From the perspective of enterprises, Li Haijun attributed the US dollar depreciation strategy to the limited economic recovery in the United States and the reduction of private consumption capacity.

This is a common pressure felt by export oriented enterprises in Jiangsu and Zhejiang provinces this year, especially for manufacturers of leather products with relatively high price per unit.

Leather shoes representing high-end products gradually reduce the proportion of shoes exported to Wenzhou.

In the first half of the year, the export of leather shoes accounted for 17.07% of the total value of Wenzhou's footwear exports, down 1.71 percentage points from the same period last year, down 7.35 percentage points from the same period in 2008.

Li Haijun said, because AOKANG positioned in the high-end export shoes, foreign buyers are deterred, and long-term AOKANG cooperation GEOX orders are also declining.

At present, the main competitors of China's footwear exports, such as Indonesia, Vietnam, India and other neighboring countries, are playing a favorable role in the competition with China's footwear exports because of their cheaper labor cost advantages.

AOKANG is mainly OEM for some high-end customers in Europe. It exports nearly 3 million pairs of shoes annually, and the main export markets are concentrated in Western Europe and North America.

The further depreciation of the US dollar has a great impact. Li Haijun said that profit margins have been directly reduced.

In the long run, the share of Chinese companies will shrink in the North American market, especially the sales of high-end consumer goods will decline quickly.

Li Haijun said the company's top management is actively responding, but it has not yet received the instructions.

Li Haijun said that although the result is unpredictable, it is believed that the Chinese government will take protective measures, so long as the North American market can persist, it will not quit.

Domestic labor costs and raw material costs have risen. If the exchange rate has been unstable, it will be fatal to Chinese shoe companies.

General shoe business profits have been very low, gross profit 10% - 20%, if this situation has been deteriorating, shoe enterprises may generally decline 10% gross margin.

Some enterprises that fail to carry out industrial upgrading in time are likely to go bankrupt.

At the beginning of 2009, considering the pressure to reduce the depreciation of the US dollar, AOKANG had adopted the euro settlement instead of the US dollar, but it did not last long. During that period, the euro had been devalued and the measure was discontinued.

Now, Li Haijun said, AOKANG does not rule out reconsidering the opening of the euro settlement.

The profit earned by the exporters should be settled into Renminbi when entering the country. If the imported raw materials are to be bought in Renminbi for the paction, the risk of price difference will be generated after the purchase and purchase.

Therefore, Li Haijun suggested that in order to reduce exchange rate risks, enterprises should consider the possibility of trading directly in US dollars.

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Expansion decompression

AOKANG has gained considerable experience in the export war.

In fact, Wang Zhentao, chairman and President of AOKANG Group Co., Ltd., also serves as vice chairman of China Leather Association. He has been committed to the joint shoe enterprises' response to the changing international trade situation.

In March 2010, the European Court of first instance dismissed 5 Chinese shoe companies' claims for anti-dumping cases.

In July 2010, AOKANG formally appealed to the high court of the European Union, indicating that the lawsuit between Chinese shoe companies and the European Union has reached the final stage in legal proceedings.

At the same time, the other 4 shoe enterprises have expressed their abandonment.

This lawsuit has drawn an important lesson from AOKANG, and the export market should not be concentrated on individual areas. Otherwise, once the international trade situation has changed, the losses will be heavy.

Because of this, with the opportunity of the Wenzhou municipal government's economic and trade cooperation with Italy, AOKANG acquired the famous shoe brand Wanli Wei of Italy in May this year. On the 13 th of this month, AOKANG announced the establishment of AOKANG Wanli international R & D center and procurement center, and worked in Italy Wanli Wei headquarters. Wanli Wei provided the necessary equipment, production personnel and technical guidance for the two centers, AOKANG provided design and procurement personnel, and the two sides completed the preliminary design, production and mass production in AOKANG's domestic production base.

The development mode of Wanli Wade is totally different from that of AOKANG. Its international brand positioning does not apply to the channels of street stores. Wang Zhentao, chairman of AOKANG group, said that this requires AOKANG to differentiate itself from existing operation teams.

At present, Wanli Wade Greater China has already set up a team that is good at dealing with shopping malls and having an international management concept, and has established a network in a shopping mall in Beijing, Shanghai and Guangzhou.

Wang Zhentao said the next move will develop the Middle East and Africa markets.