Dangerous Order: Sub Trigger Trigger China Export Loss

Putting down the phone call to friends, Yang Song felt cold on his back and almost had to sweat.

It has been 5 years since he made foreign trade. He has never been so nervous lately.

Yang Song is a foreign trade SOHO family in Tianjin, which mainly deals with the export of ceramic products to the United States.

One of his old American clients gave him a batch of ceramic dishes and paid 30% of the deposit.

Yang Song delivered the goods in accordance with the contract last month.

Now half a month has passed, and the payment for old customers is still slow.

Yang Song called to the other side of the ocean and was told that the goods were still stacked in the warehouse of Losangeles port.

He hastened to call the old customer for several days, and there was no answer.

"Can this old client go bankrupt?"

A terrible thought flashed across Yang Song's brain. He took a breath of cool air and dared not think further.

In this year's situation, Yang Songji may have guessed right.

According to Lin Jiujiang, deputy general manager of China Export and Credit Insurance Corp marketing department, the US sub prime crisis is turning into a nightmare for thousands of Chinese exporters.

"Affected by the impact of the crisis, a large number of us customers have been in arrears of funds and difficulties in funding since the beginning of this year." in April 9th, Lin Jiujiang briefed our reporter that in the 1-3 months of this year, under the China Export and Credit Insurance Corp contract business, China's export enterprises reported losses of 47 million US dollars, accounting for more than 36% of the global trade losses, up 130% from the same period last year, an increase of nearly 100 percentage points higher than that of the global trade losses.

In view of the fact that the clients of China Export and Credit Insurance Corp are mostly foreign trade enterprises with a certain scale, Lin Jiujiang believes that this indicates that the attack on China's foreign trade is spreading from small and medium-sized enterprises, small and large ones, and large orders.

The payment crisis: "the goods have gone, the buyers have gone bankrupt". This year's recession is Yang Song has never met in 5 years.

That customer is one of several fixed customers he has developed in the United States in the past few years. His reputation has always been good.

As long as he regularly finds the familiar factory production according to his order, and exports through the affiliated foreign trade company, the monthly payment of hundreds of thousands of dollars will be paid to the account here.

But from the beginning of this year, things are getting worse.

First, orders fell sharply.

"There used to be several new customers asking for samples or sending samples every week, and now they are all gone.

Those old customers send fewer and fewer emails.

Then, there will be no money, no money can be found.

Yang Song hesitated and had to dial a friend who had been doing this for a longer time.

"My goods have also been sent to the United States, and they refuse to accept it, because the customer company has gone bankrupt."

Friends complain on the phone.

Yang Song was dumbfounded and did not expect his friend to be more trouble than himself.

When Yang Song and his friends were in a terrible state, Lin Jiujiang also received reports from several clothing and footwear manufacturers in China. They were all customers who came out of the insurance company. Their buyers were the same company, a sports brand in the United States. The total amount involved was as high as 5 million dollars.

They, as the brand of the sports brand in China, were rejected at the same time.

The sports Brand Company explained that, due to the sluggish US consumer goods market this year, the company's planned sales plan for the Christmas season could not reach the expected level, so inventory backlog could not be paid on time.

In the case of China's surrender, most of the US companies that are in arrears have concentrated on two situations: first, the market is stagnant and the stock is overloaded; secondly, the money is tight and the funds are difficult.

According to the data released by the US Department of Commerce, the retail sales in the US market decreased by 0.6% and 0.4% respectively in January and February this year due to the subprime crisis. Durable goods orders decreased by 4.7% in January, 1.7% in February, and two months in factory orders, while wholesale inventories rose for two consecutive months.

Under the economic downturn, the old customers like Yang Song suffered from "anti water".

Nakade Ho's other customer who exports aquatic products is much more unlucky than Yang Song. A US distributor who worked for many years for the first time appeared overdue in the beginning of this year, with an amount of nearly US $900 thousand.

American companies have no money to pick up goods, causing goods to remain in port.

According to the other side, almost all the capital outlet of the American company is blocked up. On the one hand, their capital flow is not good enough. On the other hand, the downstream buyers are also unable to deal with it, resulting in the backlog of the company's stock.

And bank loans are starting to tighten, which can not afford loans.

The reported loss cases are mainly concentrated in home decoration, building materials, retail, auto parts and other industries that are sensitive to real estate and economic prosperity.

The cases with higher reported losses involve mechanical and electrical products, consumer goods and auto parts.

"The delinquency of the home furnishings and building materials industry is directly related to the downturn in the local housing market after the US crisis," explains Lin Jiujiang. The difficulties in the retail and auto parts industry are due to the depressed consumption in the US market.

In the face of the unprecedented wave of arrears in the negotiation of sportswear, most of the insurance companies, through their own overseas recovery capabilities, have forced American companies and Chinese manufacturers to sit at the negotiating table to discuss solutions and strive to minimize the losses of Chinese manufacturers.

"For example, the US sports Brand Company, under our mediation, was forced to accept a repayment plan."

Lin Jiujiang said that according to this plan, the US side will withdraw all the goods after paying 50% of the goods first.

The remaining 50% of the sum of money, the written commitment of the United States since the beginning of March 2008 instalment, pay 25% of the balance at the beginning of each month, within 4 months of liquidation.

Of course, more cases can not be so luckily resolved through pnational consultation.

Most of Nakade Ho's clients are large and medium-sized foreign trade enterprises with a certain scale and undertaking large orders.

As for the small and medium-sized enterprises who work for small orders, because there is no such kind of professional "collectors" to help, customers in the United States have to admit their bad luck after rejecting the goods for various reasons.

"Because the size of these small and medium-sized enterprises in the United States is not large enough, the recession will come down, and even sit down and talk with you about how to repay the money."

Yang Song said, as far as he knows, the solution to his friend who had been bankrupt by a US client was to take all the losses himself, and then spend tens of thousands of dollars to pport the goods back to China and find ways to deal with it.

However, Lin Jiujiang believes that many people believe that the small and medium-sized export enterprises bear the most of the risk of export deterioration this year.

In fact, in the 1-3 month, when China's export enterprises reported an increase of 130% over the same period, the number of reported cases increased little. This shows that the loss of large enterprises and large orders has increased.

Disaster escalation: the crisis is spreading, big companies may make big orders, and the troubles of China's foreign trade industry are far from over -- the US market is changing.

This plus entrepot trade has three supermarkets in China's export market, and it is becoming a heartbreak for China's manufacturing industry.

According to the data released by China Customs, China's export growth to the US began to decline gradually since last year. In the first quarter of 2007, China's exports to the US increased by 20.4% compared with the previous quarter, narrowing to 15.6% in the two quarter.

After the outbreak of the subprime crisis in July 2007, China's exports to the United States in the three quarter increased by 12.4% compared to the fourth quarter, and then narrowed to 10.8% in the fourth quarter.

By February this year, exports to the United States had recorded a negative growth of 5.2%.

According to the data released by China's Ministry of Commerce in April 10th, China's exports increased by 21.4% in the first quarter of this year, down 6.4 percentage points from the same period last year.

What is even more worrying is that with the spread of the subprime mortgage crisis, Chinese enterprises will have the same trouble in a series of markets, such as Europe and Latin America, after the US buyers "change their faces".

The credit risk of many industries and related buyers in the surrounding areas of the United States, including the European Union, has continued to rise.

In response to the grim situation, the China Export and Credit Insurance Corp recently set up a sub loan crisis research team to strengthen risk monitoring and control mechanisms to deal with the risk of international buyers caused by subprime loans.

While expressing that it will continue to provide international business accounts and services for domestic enterprises, it also puts forward a series of suggestions to its customers, including strengthening contacts with overseas customers, making full use of credit investigation, internal information exchange, participating in exhibitions, visiting customers, etc., to track the dynamics of overseas customers' credit and strengthen the tracking and demanding of export accounts receivable.

"If you are in a situation of abnormal return, you can't wait to see the delay. You must intervene as soon as possible and deal with it as soon as possible."

Lin Jiujiang suggested that in order to take the initiative in the next negotiation, Chinese manufacturers should strengthen the management of internal contract documents during this period, and pay attention to collecting e-mail and correspondence and other information from both sides, especially written materials, for later use.