Dongguan Footwear Industry Moves Actively To Deal With RMB Appreciation

January 11th news relative raw materials

On the occasion of the new year, many enterprises are stepping up their efforts to sign new year's orders. But when signing contracts, how to minimize the risks brought by the appreciation of the renminbi is a topic of great concern to many enterprises.

Jin Jin shoe industry (Dongguan) Co., Ltd. (hereinafter referred to as the Jin Jin footwear industry) has entered the hedging channel through signing the agreement with the bank ahead of time, locking in the exchange rate, increasing the proportion of imported raw materials, and increasing the proportion of domestic sales.

Year old problem

RMB appreciation

Compressed profit space

Although it is expected that the year is the busiest time for enterprises, but when our reporter stepped into Jin Jin shoe industry, he was still stunned by the busy scene at the moment.

In just one hour, the office of Wang Jinyang, deputy general manager of Jin Jin shoes industry, has been in and out of four or five offices.

It also delayed the original interview time for an hour.

Wang Jinyang apologized, saying that these two days are discussing the exchange rate with the bank. "In the future, the renminbi will appreciate and not lock up the exchange rate with the bank ahead of time. Next year's business will be more difficult."

As a certified public accountant, Wang Jinyang is an important negotiators in every exchange rate and other issues.

He told reporters that since the second half of 2010, the continued appreciation of the renminbi has had a great impact on the overall profits of the Jin Jin footwear industry.

About RMB appreciation of 10 points, the company's cost will rise 6 points.

At present, his most important task is to assist the general manager in finalizing the exchange rate agreement with the bank as soon as possible.

Breakthrough strategy

Early lock rate

Wang Jinyang said that under the circumstances of exchange rate changes and RMB appreciation, it is common practice for many enterprises in Dongguan to sign an agreement with the bank and fix the exchange rate in a short time.

The biggest advantage of this move is that no matter how the future exchange rate changes, we can ensure that the losses and profits of enterprises remain at a relatively reasonable level, both sides can accept.

In this regard, the image of the business community is called the lock rate.

The specific way of this tactic is that enterprises and banks agree on the exchange rate within a certain period of time and be fixed by agreement. No matter how the future exchange rate rises or falls, both sides will trade at the agreed rate.

Wang Jinyang believes that the golden age shoe industry needs to finalize the exchange rate for the first four months of this year before the Spring Festival.

"From the current situation, the Renminbi should appreciate, but it does not rule out the possibility of depreciation, so locking it for one month is more reliable."

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Increase the proportion of imported raw materials

In addition to working on exchange rates, another strategy for Jin Jin shoe industry is to change the supply structure of raw materials.

"In the case of RMB appreciation, procurement of domestic raw materials is certainly unfavourable, but if raw materials are imported from abroad, it is also advantageous."

Wang Jinyang said that at present, the raw materials purchased by the company account for 2/3 of all raw materials, which supports the risk of countering the appreciation of the renminbi.

But in the case of RMB appreciation continued, the company still decided to increase the proportion of imported raw materials.

Let Jin Jin shoe industry fortunately, before, in order to disperse the risk of raw material supply, Jin Jin footwear industry provided two to three suppliers for each raw material, thus forming a more flexible raw material supply mechanism.

Actively developing domestic sales

Although it is a shoemaking factory mainly based on foundry, Jin Jin shoes industry has been building its own brand "ORIZONTE" and "cheSera" since 2006.

These two independent brands are becoming the pioneers of the company in attacking the domestic market.

It is reported that after more than four years of efforts, the proportion of domestic sales of Jin Jin footwear industry has increased to 4%, and 12 Direct stores have been set up in over ten developed cities in the eastern coastal areas.

Wang Jinyang said that in order to brand, all these stores are located in the local high-end shopping malls, and do not enter the supermarkets. Although these stores are not top-level, they are also high-end.

However, as the pressure of RMB appreciation increases, Jin Jin footwear industry will intensify its domestic sales expansion this year, and plan to expand the proportion of domestic sales to 10%.

"These days, we have been discussing the plan of domestic sale, and we plan to finish it before the Spring Festival."

In addition to developing franchised stores, Jin Jin footwear industry also plans to develop provincial agents and network marketing to further speed up domestic distribution.

"If the domestic sales increase to 10%, the pressure of RMB appreciation will be reduced a lot."

Wang Jinyang said.

Journalist observation

Converse thinking

Break the dangerous situation

The appreciation of the renminbi has a considerable impact on the export oriented Dongguan enterprises.

The appreciation of the renminbi has increased the cost of exports to foreign countries.

However, everything has two sides. The appreciation is unfavorable to the export of products, and it may be a good thing to import.

According to media reports, in the case of RMB appreciation, the profitability of some local paper-making enterprises has improved even more. The reason is that most of the pulp from these paper-making enterprises are imported.

In the same way, Jin Jin shoe industry is a good way to offset the "loss" of exports by importing raw materials and importing raw materials.

With the coming of the new year, the problems faced by enterprises are numerous and complicated.

Evading the problem is not a way, but if we can change a way of thinking and take the initiative to find a solution, we may find another kind of vitality.

Jin Jin shoe industry is the best example.