RMB Appreciation &Nbsp; &Nbsp; Small Shoe Pressure Cost To Domestic Sales Positive Response

It was in March and April, especially in the middle of 4, about whether the US Treasury's exchange rate policy report set China as a "currency manipulator country".

When the US government postponed the release of the report, China announced its reform in June.

Since then, the appreciation of RMB has not begun to show its influence.

"Last month, there was a South Korean guest who counted no profit according to the exchange rate, and an additional order was cancelled directly."

Li Ling, who handles foreign trade crafts in Yiwu Small Commodity City, said that even after the appreciation of the renminbi, even the old customers could not guarantee the order quantity.

"Do not appreciate any more!" Yang Ping blurted out the RMB exchange rate in Yiwu small commodity city.

The curtain of Yang Ping's own production and marketing is mainly exported to the Middle East. In the past month, it can export five or six containers, which has been reduced by half since the beginning of this year. The profit margin has also dropped from 3% last year to about 3%.

Rapid appreciation, enterprises "bleeding"

In June 19th, the central bank announced RMB exchange rate reform. In June 22nd, the central bank set the central parity of RMB against the US dollar to 1 yuan to 6.798 yuan, a 295 basis point increase in one day.

At that time, Quanzhou Dragon Group Co., Ltd. of Fujian province still had about 4000000 US dollars, and after the product was ordered, it failed to deliver the foreign exchange, which resulted in a about one hundred thousand decrease in profits one day.

The company's main business is the processing and export of craft gifts. Chen Shaohui, deputy general manager of the group, told our reporter that from the negotiation with foreign businessmen to the shipment of products, the whole process usually takes more than 5 months, and the company's greatest fear is exchange rate instability.

A similar scenario is on the way.

"The exchange rate of RMB against the US dollar may be 6.8 a few days ago, and now it is 6.6. The difference between the 0.2 is that the amount of money taken back is much less."

At present, Li Haijun, the manager of the International Trade Department of AOKANG shoe industry in Zhejiang, is most worried about it. It is also a sharp contraction of the money earned from AOKANG.

For the export enterprises, the most terrible thing is "instant bleeding" and the loss of profits.

"For small companies in the south of China, with smaller profits and smaller exports, the appreciation of the renminbi will bring more profits to them."

Zhao Xijun, vice president of the school of Finance and finance, Renmin University of China, told the International Herald guide.

In the small commodity city of Yiwu, most merchants use RMB to settle accounts through foreign trade companies.

Despite the seemingly direct impact of exchange rate fluctuations, the appreciation of the renminbi is still overburdened by foreign trade businesses.

Zhou Ailing, owner of Yiwu yuan Chuang Christmas craft co., Ltd., said that foreign orders from the order to payment often go through months or even a year.

The exchange rate is unstable, and enterprises are not realistic in taking orders.

Since the beginning of last year, the trend of RMB appreciation is obvious. The number of foreign trade companies deducting the amount from the loan is also getting higher and higher, from 2% to 3% to 5%.

Yiwu is one of the biggest exporters of Christmas gifts all over the world.

Zhou Ailing's enterprise is a typical "shop front factory" mode in Yiwu, and half of its products are produced by their own factories.

Zhou Ailing said, for Christmas commodities, this year's money has also been put in place, "anyway, this year is over, but next year's exchange rate is not at all, the merchants around are particularly confused."

Close to the "critical point", order free

For export enterprises, the time difference between order and settlement determines the direct relationship between exchange rate appreciation and enterprise income.

The continuous and rapid appreciation of RMB for several months has increased the risk of foreign exchange settlement.

Reporter survey found that, in the past six months, many foreign trade export enterprises have been living in the huge shadow of "RMB appreciation expectation", especially in September, the RMB to the US dollar exchange rate has increased rapidly, the RMB exchange rate rose to 1.74% against the US dollar in that month, and the largest monthly increase since the reform of foreign exchange earnings.

In the face of this situation, many export enterprises are very helpless. On the one hand, they have to reluctantly abandon the long list to replace the short list and raise the price temporarily. At the same time, they are constantly dealing with customers. If it is for the purpose of maintaining the big clients, they will have to bear the corresponding losses themselves, because under normal circumstances, foreign enterprises rarely negotiate the appreciation of the renminbi and the depreciation of the US dollar after the price is determined.

"If it is a slow appreciation, enterprises can expect to control costs through reasonable expectations, and the rapid appreciation will not be able to bear them," said Yin Botao, general manager of Kunshan Yang Hao photoelectric Co. Ltd.

The reporter learned from some export enterprises in Jiangsu that when the RMB appreciated against the US dollar from 2006 to 2008, because of the stable appreciation, they could hedge risk by means of locking the exchange rate and shortening the quoted price time.

Now, faced with the unpredictability of exchange rate changes, exporters are more inclined to make a single move, and some enterprises have to lose many large high-end customers who tend to sign long orders.

The uncertainty of the appreciation rate may even make the order "beat the bucket".

Guo Tianyong, director of the China banking research center of Central University of Finance and Economics, told reporters that the appreciation of the renminbi may mean a higher price for foreign importers than before.

The result is that these importers find reasons to postpone the delivery time.

Yao, a manager of the import and Export Department of an umbrella enterprise in Zhejiang, regrets that although orders are still so large, more and more goods are left behind because of the default risk of importers. "Now I am afraid to see the depreciation of other countries' currencies, which gives me the courage to panic and fear that customers will have to postpone delivery time or even default."

"In fact, since the second half of this year, the parity of RMB against the US dollar has approached the" critical point "of most foreign trade enterprises' expectation of appreciation.

Now every change of base point will make the enterprise very hard.

In my view, China does not have room for rapid appreciation of the renminbi.

Zheng Zhiqiang, assistant general manager of marketing center of color TV producer and SKYWORTH multimedia (Shenzhen) Co., told reporters at the Canton Fair.

The 108th Canton Fair was held from October 15th to November 4th.

One of the most difficult problems faced by buyers and sellers is the RMB exchange rate.

"The best state we envisage is to set the exchange rate at around 6.5, but we are still in the process of negotiating with our clients," he said.

Gong Huajian, Gong Huajian, head of the foreign trade department of Weixi group, Jiangsu, said that in the face of a dilemma, enterprises can only sacrifice themselves or lose customers to wait for exchange rate stability or lose profits to safeguard customer relationship.

If we continue to appreciate...

"The profit is low, the export products need to raise the price to make up for the losses, but the guests are hard to accept. The price of raw materials is rising. Now it has affected the receipt. To some extent, the enterprise has felt the tremendous pressure similar to the financial crisis!" a person in charge of the Shengshi Group sales company in Wujiang, Jiangsu, told the International Herald guide in October 19th.

He said that some small textile enterprises in Jiangsu have stopped taking orders to avoid possible losses. For larger enterprises that can withstand the pressure of RMB appreciation recently, the loss of profits is inevitable.

The reporter understands that the current situation of Jiangsu textile industry is generally recognized: profit making enterprises account for about 50%, and the overall profit margin is between 3% and 4%. If RMB appreciation exceeds 5%, 2/3 of textile and garment enterprises will not be able to afford it.

Similar to the textile industry's experience, the RMB appreciation has a negative impact on traditional industries including clothing, machinery, electronics and toys in the context of the rising exchange rate of RMB against the US dollar.

After several years of rising resources, raw materials and manpower costs, most of the export businesses of these traditional industries have become low profit margins or small profits. It is difficult for them to digest the continued appreciation of the renminbi and the pressure of rising costs.

"The low cost advantage of Chinese exporters may be gradually disappearing."

Li Haijun pressed reporters on the difficult situation, all kinds of raw material prices, to varying degrees of cost. Foreign environmental protection requirements increased, resulting in increased packaging costs and increased labor costs caused by shortage of workers.

The Shenzhen science, technology, industry and Trade Commission and Information Technology Commission released the October analysis report. If the RMB appreciation rose by 3% in 2011, the number of employed persons in Shenzhen will be reduced by about 600 thousand, and the export volume will be reduced by about 9 billion US dollars.

Shenzhen clothing, shoemaking, toys, handicrafts, ceramics industry is a relatively high proportion of domestic production and raw material costs. Over 60% of the value-added products of these industries are completed in China, and the net profit of their export products is generally low, only about 3%. In addition, enterprises in these industries are generally lacking in core competitiveness, and once RMB appreciation is 3%, these enterprises will generally fall into a state of loss.

Reuters published an article in October 25th that the global resource business exhibition center quoted the latest research and said that more than 2/3 of Chinese suppliers surveyed indicated that if the RMB appreciated by 2% or more, its export volume would begin to decrease.

A total of 238 Chinese suppliers were interviewed, and 32% of respondents pointed out that the appreciation of RMB only 3% would cause export decline.

Experts told reporters that if the RMB appreciation in the short term 3%, then the appliance, automobile, mobile phone and other production enterprises profits will drop by 30% to 50%.

Answer: wait for death or move to change.

Under the background of pressing costs for small businesses, busy adjustment of medium sized enterprises, and tight bargaining power of large export enterprises, the "made in China" explores their respective countermeasures in the context of the expected appreciation of the RMB exchange rate.

"RMB appreciation, the most direct response of enterprises is to raise prices, but the actual situation is difficult to implement."

Gong Huajian, director of the foreign trade department of Weixi group in Jiangsu, told the International Herald guide in late October that the company engaged in the export of metal processing products was originally prepared to raise the price of the product, but it was difficult to operate because the agreement between the general foreign customers and the foreign customers was determined at the beginning of the year, and the order settled in US dollars was determined only by the company's loss of exchange rate.

"Made in China" naturally will not "sit back and wait", seeing the loss of profits, the order slip away, how to "move to change"?

Small business pressure costs, domestic sales

The invisible hand of the market naturally responds.

It is a natural choice to reduce costs, such as finding OEM in areas where labor costs are low.

In the past, Zhou Ailing, who was originally engaged in the "front shop and back factory" operation in Yiwu, has pferred the products such as fluffy and snowflakes to Jiangxi production.

Although there are more pportation costs, the cost can be reduced by two or three.

However, this method can not solve the problem completely, and only about 10% of the total sales can be OEM.

"Foreign trade profits of small commodities have been as thin as razor blades, gross profit is less than 10%, and compression is even less profitable, but we really can not think of other ways to deal with it."

Zhou Ailing said.

It is a new choice for many small businesses in Yiwu to reduce the degree of dependence on foreign trade and deal with the unstable factors in the overseas market.

"The east side is not bright west, and the domestic market has developed to a relatively mature level. Our product technology is quite unique, and it is very popular in overseas markets. Now it is recognized that its market recognition in Shanghai, Beijing and other first tier cities is also very high.

China's demographic dividend still exists, and foreign brands are grabbing the Chinese market.

Exchange rate fluctuations let us find a new field of domestic sales. "

Xu Zhifu is the sales director of time craft Limited.

Over 80% of the company's iron and glass handicrafts have been exported to the United States. Over the past year, the company has reduced its foreign trade share to less than 60%.

Even overseas businessmen who have a more direct perception of the international market have begun to shift the market.

Chen Lingen, vice president of Jiaxing overseas chamber of Commerce, said that the sales share of members of the chamber of Commerce in the past 80% came from overseas. In the past one or two years, it has been gradually reduced to about 30%, while 80% of the profits came from the domestic market.

The chamber of Commerce has more than 180 overseas Chinese businessmen. Most of them have production bases in China. They operate bags, clothing, wool products, etc., and trade in more than 70 countries and regions such as Europe and the United States.

"In the short term, moving to the domestic market is a good way to deal with exchange rate changes.

The appreciation of RMB has objectively promoted the expansion of domestic demand, and has made the fierce competition in the domestic market eliminate a number of enterprises to achieve the healthy development of the industry.

Chen Lingen said.

It is difficult for medium enterprises to adjust.

For export enterprises with larger export scale but still hard to control the market trend of products, it is not easy to pfer factories and pform the market. They should first deal with some technical means and internal adjustments in exchange rate changes.

"At present, there is no effective way to deal with the pressure of appreciation. We can only wait for the exchange rate to be relatively stable and sign the contract again."

Gong Huajian said.

In response to the policy of RMB appreciation, many executives interviewed said that because exchange rate is a hard "environmental indicator", it is almost ineffective for enterprises, and it can only be undertaken first and wait for the situation to be stable.

However, reporters have learned that some enterprises do have a "back burner", and those enterprises that have taken some measures and have taken the initiative have taken the lead.

For example, the signing of the forward exchange rate contracts with the banks will, to some extent, avoid the impact of exchange rate changes. Clearing the "non US dollar" settlement, such as the adoption of the euro and yen, will avoid the impact of RMB appreciation on the US dollar to a certain extent. It is a way for export companies to do so, but it is necessary to consult with importers overseas.

A more long-term solution is to pform the product mix.

Experts said that after Japan's Plaza Accord in 1985, although many Japanese companies had to invest overseas, the local enterprises left behind pursued high-end technology and product quality, and made efforts to produce products with high added value. They also maintained and created many international brands.

"The goal of the company's product pformation is to produce special paper products instead of imported products in the domestic market, pfer production capacity to high-end products, and place regular life paper business in the second place. This will not cause market competition for exports to domestic markets, and improve product competitiveness."

Zhuang Feina, an international trade department of Suzhou golden leaf paper group, said that the pformation of product structure is one of the measures taken by enterprises to cope with the appreciation of Renminbi for several years, and has made a major contribution to the company's avoidance of exchange rate risk.

However, the appreciation of the local currency helps to optimize the economic structure and industrial structure, and also requires a relatively relaxed environment and agenda.

"Structural improvement takes a long time to complete.

The excessive and excessive appreciation of the exchange rate will probably result in the failure to optimize the structure and lead to structural problems.

Mei Xinyu, an associate researcher of the Ministry of Commerce International Trade and Economic Cooperation Research Institute, said.

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Large enterprises hold tight bargaining tools

The control of the layout and bargaining power of large export enterprises for international production and sales is a sharp weapon to deal with the "currency shock wave" that may come at any time.

This strategic response comes first from the increasingly extensive international perspective of business managers.

From the front-line survey of the Canton Fair, the performance is quite obvious.

Many large business managers can even analyze the possibility of "exchange rate war" into "trade war".

"The United States still wants to consult with China about the exchange rate issue, and now it will tear it up and start a trade war against the United States," Xiao Youyuan, general manager of GREE electric Limited by Share Ltd overseas sales company, told reporters. "As early as the end of last year and early this year, the Chinese foreign trade enterprises had made corresponding changes in the RMB exchange rate, and the export prices based on these judgments were also the basis for dealers in many parts of the world.

If the so-called sanctions are used to force the market to break this structure, the most direct consumer is the country's consumers.

"A few countries rely solely on the oppression of exchange rate policy, and it is impossible for China's foreign trade industry to lose competitiveness," said Diao Yunfeng, Minister of overseas promotion of Haier Group Company. "Taking Haier as an example, the group now has 29 manufacturing bases worldwide, and the production, design and sales of many products have been localized. The changes in the RMB exchange rate will not constitute a fundamental impact on the survival of enterprises."

The so-called "ships sail well".

Enterprises have the ability to bargain when they are bigger. In a country, a chain of industries is bigger and bigger.

"The cost of the exchange rate will eventually be partially passed on!" the gas of Yan Jian Bo, the International Trade Department of Zhejiang Ningbo Seymor Electrical Import & Export Co., Ltd., is precisely due to the status of China's global electrical appliance manufacturing industry as a bull ear. "The RMB continues to appreciate, the Chinese export enterprises will certainly raise the price. Then foreign customers either choose to accept the price increase or choose other countries with lower prices, but no country has the production capacity to replace China, and the buyer's cost of rechoosing customers is also high."

"At the beginning of the year, we have made a plan for the appreciation of RMB 5%, indicating the change in the exchange rate in the contract, making a deal in accordance with a certain extent, integrating the risk of exchange rate changes into the business, and reducing the risk of operating camp by strictly controlling the supply chain and reducing the stock."

Liao Zhiwen, creative design director of Guangdong Xinbao electrical appliance company, said.

Many enterprises say that with the acceleration of industrial structure adjustment and product upgrading in recent years, the bargaining power of Chinese enterprises in the international market has increased substantially, and enterprises already have the ability to adjust prices of products along with the change of currency value.