RMB Appreciation For Half A Year Is Near 3%&Nbsp; &Nbsp; Survival Survey Of Textile And Garment Enterprises

China's textile and garment industry has a high dependence on foreign trade for over 50% years. The average profit margin of the whole industry is relatively low, about 3%, especially the low added value of foreign trade enterprises.

In recent years, although the industry's transformation and upgrading is speeding up, the overall price factor is still an important factor affecting exports, and the sensitivity of export prices to exchange rate fluctuations is very high. Since the second half of this year, the exchange rate of RMB against the US dollar has fluctuated continuously, and the appreciation of RMB has been nearly 3%. Under such circumstances, enterprises do not dare to receive long-term orders, so as to undertake short-term orders.

Ning Fang Group, located in Ningjin, Hebei, is a comprehensive enterprise group integrating textile, printing and dyeing, garment processing and trade. The group is currently a world famous brand fabric manufacturer, such as H&M and GAP. H&M orders for Ning spinning are usually about 25 days, the longest not more than a month, and will be chased at any time, and each order will be settled at the prevailing market rate.

Xu Jianlin, general manager of Ningbo Textile Group Co., Ltd. said that only 20% of the total business volume of the group is mainly made for garments and fabric processing for some customers in Japan, Europe and the United States. For this part of the business, orders are usually delivered within 45 days to 60 days, and the maximum delivery time can not exceed two months.

A survey also shows that during the Canton Fair this year, orders within 3 months exceeded 6, 3 months to 6 months of orders more than 3, 6 months or more orders less than 10%.

The second biggest headache for businesses is that the appreciation of the renminbi has directly squeezed the profit margins of enterprises.

Dalian Fushan Garments Co., Ltd.'s export business includes two large blocks, the European and American markets and the Japanese market. Japan's market share accounts for about 80% of its total exports, and exchange rate fluctuations have little impact. The most sensitive to exchange rate fluctuations is the processing business of the European and American markets which account for about 20% of the export share.

Some famous brands such as DKNY, CK and T.M.Lewin have placed some of their coats and windbreaker categories from Dalian to Fukuyama in 2008.

The orders for processing these brands in Dalian Fukuyama have been signed in November, December and January of 2009. The exchange rate stipulated in the order is calculated at the prevailing exchange rate. Near the end of the year, the company's settlement found that the actual sales in the European and American markets were larger than those predicted at the beginning of this year.

The days of SMEs are even more difficult. It is understood that the loss of some small and medium-sized enterprises is bigger, and some orders can not even be delivered normally, so they have to break the contract.

What is more common for enterprises to feel headache is that, influenced by multiple factors such as domestic inflation pressure increasing, the appreciation of RMB is expected to be stronger in the future.

A person in charge of a foreign trade sweater processing plant in Changshu, Jiangsu, said that the enterprise is currently suffering. The fluctuation of exchange rate overlaps with the pressure of raw material price increase and labor cost increase. Enterprises even do not know how to grasp this trend.

For the whole industry, someone has made a budget in the industry. With an export volume of about US $100 million, the value of RMB is appreciated by 2%, and its loss is about 1000~2000 yuan.

According to customs statistics, this year 1~9 months, China has completed the export of clothing and clothing accessories $93 billion 488 million. According to this conservative estimate, the profit lost by RMB appreciation in the first three quarters of the whole industry is at least nearly 1 billion yuan.

　　 Some orders accelerated to Southeast Asian countries.

According to statistics, since the beginning of this year, 29 provinces and autonomous regions in 31 provinces and autonomous regions have raised the minimum wage standard, with an average increase of 23%. According to data from Switzerland, the wages of migrant workers rose nearly 30%~40% this year. In the next 3 years, the annual wage increase of migrant workers will reach 30%, and the minimum growth rate will remain above 20%. In addition, the price of production factors such as raw materials and auxiliary materials has increased by 30~100% this year.

These factors overlap with the appreciation factor of RMB, which makes the price advantage of Chinese textile and garment export enterprises gradually losing, and many enterprises have to raise their prices to ensure their survival.

According to the first textile statistics, before September this year, China's main commodities increased the average export price of the world's total exports, of which the yarn increased by 11.2%, the fabric increased by 8.5%, and the clothing increased by 3.5%. In particular, the rate of increase in the second half of the year was accelerated. In September, the unit price of clothing exports increased by 10.3% over the same period last year, reaching the two digit growth for the first time in the year. Shaoxing is a major exporters of textiles in China. In the first 10 months of this year, the average price per garment in Shaoxing rose to 3.53 US dollars, up 13.33% from the same period last year.

Faced with this increase, many foreign businessmen said that "20% of the increase is generally unacceptable." Under such circumstances, some foreign businessmen plan or have begun to reduce the volume of purchases in China, partly transferring orders to newly emerging manufacturing countries with lower cost.

Japan's Fushan company's own orders have been processed and manufactured by Fushan, a wholly-owned subsidiary in Dalian for many years. However, in the second half of this year, Fukuyama has started to visit three countries in Burma and Indonesia, and has begun to engage with the responsible parties to prepare for processing outsourcing or directly set up factories there.

Japan's Fushan headquarters think that the processing cost of Dalian subsidiary has been relatively fixed, and the future trend is that the cost will still increase. Under this trend, some of the orders will be transferred to third countries with more price advantages. These orders include both Fukuyama's own orders and the orders from European and American customers.

First textile network editor in chief and senior analyst Wang Jin analysis pointed out that this round of exchange rate fluctuations has three adverse effects on the textile and garment industry.

One is to further compress the profit margins of enterprises; the two is that the appreciation of RMB has increased the cost and quotation of China's textile and clothing, which has weakened the competitive advantage of China's textiles in the international market to a certain extent; three, the pressure and expectation of RMB appreciation has become the most uncertain factor in signing the bill for export enterprises, and doubts about the trend of the late stage or even directly lead to the loss of some orders.

　 Industry is forced to accelerate transformation and upgrading

For the industry, the appreciation of the renminbi is not necessarily a bad thing.

Faced with the fluctuation of exchange rate and the rising cost pressure and the baptism of financial crisis, more and more export enterprises have realized that words such as business transformation, product innovation, enhancement of R & D capability and value-added products are no longer empty slogans, but must be deeply embedded in the actual operation of enterprises. The response of many enterprises in this interview has proved this very well. On the whole, RMB appreciation can further promote industrial restructuring and industrial upgrading.

Cao Heping, an industry expert who has always been more concerned about the textile and garment industry, believes that RMB appreciation will indeed bring some cost pressure to the export of industries and enterprises. But think about what our export competition in the past depends on: low cost and cheap labor. The export of textile and clothing products in China is mainly based on low price and low cost as the advantage. This situation is only a kind of staged performance. At present, this historical stage should end, and the "low price era" made in China should end.

Cao Heping believes that in the long run, China is the world's largest producer and exporter of textile and clothing. In the future, it should have the pricing power and form a world trading center in China. The revaluation of Renminbi and the increase of multiple factor costs will force enterprises to carry out technological transformation, balance the factors of price increase through technological management chain and save management costs, increase the ability of quick reaction, and constantly change themselves.

　 Measures for enterprises: diversification of export market

To ensure profits, we must diversify risks as far as possible. Facing the increasing cost pressure, "diversification of export market" is also a good way to seek new profit points and diversify risks. For example, in addition to the European and American businesses, the main customers of enterprises can also expand the Asian markets such as Japan, Malaysia and Korea. In particular, we need to pay close attention to some emerging export markets, such as the more active Middle East market and the South American market in the past two years.

Dalian Fushan Garments Co., Ltd. was jointly funded by Japan WATZ Co., Ltd. and Itochu Commercial Co., Ltd. in 1992. Its FKYM is made up of windbreaker and has the title of "windbreaker making expert", occupying the highest share in the windbreaker market of Japan. After the establishment of a wholly foreign-owned company in China, it has also entered the Chinese market. Dalian Fukuyama is responsible for expanding FKYM's market share in China while undertaking global order processing. It now insists on "two legged" walking in and out of the market.

For Dalian Fukuyama, although the RMB appreciation has made its European and American orders very profitable, the profit of the whole company has not been greatly affected, for two reasons.

On the one hand, due to the influence of Fukuyama in windbreaker market, the high-end processing route has been persisted for many years, the processing cost of single product is relatively high, DKNY, CK and T.M.Lewin have higher processing fees for its single products, so that the profit loss brought by RMB appreciation can be offset appropriately.

On the other hand, its export business is mainly aimed at the Japanese market. Due to the favorable profit in the Japanese market, the balance and balance between the European and American markets effectively guarantee the overall profit of Dalian's Fushan export business this year.

Faced with the current grim situation, some textile enterprises in Shaoxing have also focused on innovation in the foreign trade management strategy and the development of new export markets. Many enterprises have made more rational distribution of their export share in the continents of the world through the exhibitions of famous exhibitions at home and abroad. The South American Chile market is a good example.

According to statistics, in 1-7 months of this year, Shaoxing's exports to Chile amounted to US $58 million, an increase of 55.5% over the same period last year. Chile has gradually become one of the important export markets in Shaoxing county. In 1-7, Shaoxing and Chile had 220 export enterprises, and exports to South America amounted to $850 million, an increase of 60% over the same period last year. In 1-7, the Shaoxing inspection and Quarantine Bureau issued 1481 copies of the certificate of origin issued to Chile, with a visa value of $54 million, representing an increase of 40% over the previous year, of which Shaoxing accounted for 40%, mainly textiles. {page_break}

　 Enterprise response measures: the main domestic orders are less subject to exchange rate problems.

Hebei Ningbo Group is very calm in the current exchange rate, and the impact is very limited, thanks to the adjustment of its operation ideas in the past two years. The foreign trade sector mainly undertakes short-term orders, and the other is mainly for domestic famous brands to make order processing.

Before 2008, the group's business was basically exported, which made fabrics and clothing processing for customers in Europe, the United States and Korea. Its business adjustment began in the second half of 2008. At present, the fabric of Ningbo is still mainly exported to the European and American markets, but the garment processing sector has adjusted the direction, mainly for the domestic well-known brands of leisure products to make garment products processing.

In fact, Ningbo Group is a typical representative of those enterprises that have been accelerating transformation in recent years and gradually expanding the domestic market. Many enterprises have tasted a lot of sweeteners from the main undertaking of foreign customers to the domestic well-known clothing brand processing.

First, the order of domestic brands, delivery time is relatively easy to control, flexibility is high, order production is relatively better arrangement; secondly, to domestic clothing brand processing, profit margins than foreign customers to do high processing.

Judging from the trend of recent years, the risk of foreign orders is very large. The adjustment of exchange rate, the economic depression and trade frictions in Europe and the United States will lead to many risks. On the contrary, under the continuous and steady growth of China's economy, especially after the expansion of domestic demand has become a major policy of the country, the consumption of domestic market continues to heat up. If you can receive processing orders from domestic brands, the stability will be relatively high, and the profit rate will be higher.

　　 Enterprise response measures: Mastering the pricing power of products is the highest level.

The enterprise management believes that first-class enterprises need to have pricing power.

Over the years, when talking about the competitiveness of China's manufacturing industry in the world, whether the enterprise bosses or experts and scholars will finally point to the industry, they must grasp the pricing power of products, otherwise they can only earn the least processing fee of the bottom of the industrial chain with less than 10%.

It is gratifying to note that some enterprises have done this in their own field by virtue of their strong innovation and R & D capability. Mastering the pricing power has greatly increased the profits of enterprises, and because the pricing power is in their own hands, the initiative to negotiate with customers is also in their own hands, which is very little affected by the fluctuation of exchange rate.

80% of the products of Zhejiang red and blue textile printing and dyeing Co., Ltd. are exported to Europe, America and the Middle East. At the end of 2007, red and blue cooperated with Japanese companies to develop digital screen printing technology, taking the lead in upgrading technology and equipment. With this "screen printing digital printing technology", the quality, energy consumption and emission index of the products have reached a new height. Matching with this, since 2008, the company has also introduced the international pattern design team with heavy gold, and more than 20 new patterns have been launched every day. Since the beginning of 2007, it has been tried since 2008. The technology of digital printing has already been more mature in red and green.

After the transformation from traditional printing and dyeing to digital printing, the output of the company has declined. The output of the former is 200 thousand meters, but the output of digital printing is only 120 thousand meters. Although production has decreased, profits have increased by a large volume. The added value of digital printing fabric is higher, and the added value per meter is about 30% higher than that of ordinary printing. The price of digital printing fabrics ranges from 10 yuan to 100 yuan per meter, and the main price is 50-60 yuan.

For red, green and blue, the more profound significance is that through innovative digital printing products, it firmly controls the pricing power of the product in its own hands. At present, the way for foreign customers to place orders is to place orders according to samples, that is, ODM mode. If they want to purchase a certain fabric of red and blue, they must accept the price of red green blue.

This is the way out for red, green and blue, and it is also the way out in China. Once such a realms are achieved, it is clear that the exchange rate and the price of raw materials will no longer be a big problem.

　　 Enterprise response measures: contract with the client to increase the estimated appreciation into the contract.

From the interview situation, some foreign trade processing enterprises will have a pre judgment on the adjustment of the exchange rate in the contract period before signing a single order. Some people in charge think that this kind of sensitivity is a necessary survival ability for foreign trade enterprises.

As the most direct response, if an enterprise judges that the renminbi has an appreciation expectation, it will add the expected appreciation part to the prevailing exchange rate before signing the contract, or the two parties have agreed that if the exchange rate is adjusted at delivery, it will be settled according to the new adjusted exchange rate. Although these are only expedient measures to deal with risks, in the short term, it is impossible to reduce the loss of profits.

Wujiang Di Feng Sheng Textile Trade Co., Ltd. is a small export enterprise whose products are mainly exported to South America and Bulgaria. Enterprises are now receiving orders every month, shipping every month. In order to reduce risks, we usually add the estimated exchange rate.

The products of a sweater processing plant in Changshu, Jiangsu are mainly exported to Europe and the United States. The order now produced by the company was signed at the beginning of this year or in March and April. More than half a year ago, when signing orders with European and American customers, the expected appreciation of the exchange rate was added to the contract, when the exchange rate was about 1:6.65.

When asked whether the customer could accept such a substantial increase, the official in charge of the company said: "the current situation is in fact everybody's eyes. Foreign customers also have an understanding of this situation, so when the enterprise raises the appropriate price to the other party, both sides are sincere and will continue to cooperate." However, whether the order can be raised in the coming year, the official said, "it may be more difficult."

During this period, the trade department staff of Fushan, Dalian, are discussing the status of order acceptance after May 2011 in the European and American markets. However, due to the instability of exchange rate, the trend of RMB appreciation will continue to appreciate. It is very difficult to control when signing the bill. As a response, the company hopes to add an estimated appreciation to the exchange rate in the contract, but whether the customer can accept it depends on the final negotiation result.

　 voice

RMB appreciation does affect exports, but in terms of national policy and overall form, appreciation seems inevitable. Therefore, for foreign trade enterprises, we must grasp this trend and adjust our management ideas in time.

It is indeed a good choice for foreign trade enterprises to start undertaking domestic market orders, but the most prudent way is to insist on "walking on two legs".

Xu Jianlin, general manager of Hebei Ningbo Textile Group Co., Ltd.

Enterprises must have sufficient anticipation, and we must take a look at the trend. We can not see that the exchange rate is stable and we should relax our vigilance. Enterprises should take a long view of the future, and think from the perspective of enhancing the long-term competitiveness of enterprises to guide the production and operation of enterprises.

Wing Chun textile chairman Shi Jianhai

A few decades ago, the Japanese yen appreciated sharply against the US dollar. The final result was a great blow to the Japanese economy. This is a lesson for other countries. Personally, I think that from the current trend, it is impossible for the RMB to appreciate without the combined influence of various factors. The gradual adjustment of exchange rate is the general trend, but generally speaking, the appreciation level of the country is still within the controllable range. From the perspective of the development of the textile and garment industry, the key lies in how the industry adjusts itself.

Gong Lifeng, deputy general manager of Dalian Fushan Garments Co., Ltd.

The implementation of the US quantitative easing policy will lead to a sustained depreciation of the US dollar, and the future RMB will face greater appreciation pressure on the US dollar or a basket of currencies. The real effective exchange rate of RMB may continue to rise, and appreciation is a medium and long-term trend. Corresponding to China's comprehensive national strength, it is inevitable for the RMB to enter the "5 era" against the US dollar. In the next 5 years, under the background of rapid appreciation of RMB, China's export enterprises will face enormous challenges.