Private Enterprises In Wenzhou: Roller Coaster In The Second Half Of The Year

With the price of raw materials such as iron, copper, zinc, aluminum, oil and so on, "soaring and plummeting", Wenzhou private enterprises, which lack resources and mainly rely on light industry, are like a screaming roller coaster. They have experienced a drastic change in the past 20 years.

From the end of last year to September this year, domestic raw material prices rose, labor costs rose, and the depreciation of the US dollar led to high export costs. Meanwhile, many factors were at the same time, and a number of small and medium-sized private enterprises in Wenzhou collapsed.

During the period, Zhou Dewen, President of Wenzhou SME Development Association, put forward that 20% of SMEs are in a state of closure.

However, there was a sudden wave.

When some enterprises are still worried about increasing prices of materials and increasing inventories, they are still bargaining with foreign businessmen for exchange rate losses. Since September, the price of materials triggered by the global financial crisis and the devaluation of the euro have made Wenzhou enterprises a big surprise.

This not only caused Wenzhou private enterprises to suffer more than tens of millions of losses in the intangible, but more importantly, they found that "overseas orders suddenly disappeared".

"The situation is more serious than imagined."

Zhou Dewen said, compared with the previous wave of high cost, leading to some enterprises shutting down, this wave of material price collapse has greater impact on enterprises.

This is like an earthquake, shaking up and down, shaking a few times, and then a solid enterprise can not withstand such a toss.

"At present, most enterprises in Wenzhou have cut down production, some of them have closed down and stopped production. I estimate that 30% is more than that."

Now, in Wenzhou, some cooperative agencies are popular to send movie tickets, mainly letting business owners "relax".

As a matter of fact, this year is bound to be "very difficult" for the owners of private enterprises, especially those small and medium-sized private enterprises dealing with export.

In October 22nd, the Shanghai copper futures index closed at 37160 yuan / ton, and the price returned to the level of early 2006, down by more than 20 thousand yuan compared with September 30th, and the decline in more than 30% days was over 30%.

The sharp fall of copper prices in the short term has caused more than 60 member enterprises of the Wenzhou copper chamber of Commerce to suffer losses of several hundred thousand yuan or tens of millions of yuan.

Pan Xiuxiong, Secretary General of the Wenzhou copper chamber of Commerce, said that the boss is in a bad mood. The activity of going to Taiwan in late November has been canceled. Everyone is discussing the Countermeasures for self insurance.

"The more we do it, the more we lose. A copper factory on the scale is about 20 million tons of inventory, and at that time it lost more than 4000 yuan."

In August this year, when the Wenzhou copper chamber of Commerce was founded, many business executives said that copper prices would go up.

The head of the association also said that we should prepare well for the fluctuation of copper prices, not to suppress prices at each other, and not to engage in vicious competition.

In view of the "rising market" trend, some enterprises have bought a lot of copper products, when the price was 50 thousand yuan / ton, or even higher.

He has never seen such a sharp fall in copper prices. Feng Maoxun, the first president of Wenzhou copper chamber of Commerce and the head of Hongyuan Copper Company of Wenzhou, said that he had been in the copper making industry for more than 20 years, and that the copper price dropped sharply in the short run.

Pan Xiuxiong said that Wenzhou copper enterprises are facing a problem of deficit but not loss.

Now, all the copper making enterprises in Wenzhou have begun to cut production, or even cut production by more than 60%, or simply stop production.

At the same time, the order of the downstream enterprises has been reduced by at least 30%, which has also aggravated the uneasiness of many copper making enterprises.

The craziness of copper prices has spread rapidly to downstream copper companies, and some enterprises that originally hoarded copper products have been hit hard, such as automobile and motorcycle parts, locks, lighters, stainless steel and other industries.

Ding Mingrong, boss of Ruian BD commutator Co., Ltd. said that he had never encountered such a situation since he established his factory in 1993.

According to the briefing, as the copper price plummeted, Ding boss control the amount of copper into the 20 tons per month and control it within 5 tons at a time. "At least, this can avoid the risk of the recent copper price ups and downs."

Today, Ding boss does not want to deal with the leftovers of the copper products left in the factory. He can't sell a good price, and the leftovers will be disposed of in the past years.

Ding Mingrong said, according to past years, to the end of January to the next year, he was worried about whether to let the staff go home early for the Spring Festival.

"From now on, this year's Spring Festival is an early holiday."

Ding Mingrong was somewhat helpless. His factory almost ran 24 hours a day before September, but they began to work 8 hours from next month.

Zheng Baole, chairman of the five star copper industry, said that the biggest problem now is that the original copper material has been Invoicing at 60 thousand yuan / ton. Now the copper price has dropped to only 30 thousand yuan / ton, but the tax paid to the tax department has not been reduced correspondingly.

The price of raw materials has plummeted, causing some enterprises to suffer huge losses. But in the long run, this should be good news.

However, a number of Wenzhou enterprises are reflected in the relationship between upstream and downstream industry chains, and the cost of private enterprises is rising instead of decreasing.

Ding Mingrong said that an ordinary automobile spare part commutator, copper material cost accounted for about 50% of the total cost, copper and other major raw materials prices will ease the cost pressures of enterprises.

But at this time, the "forced effect" of downstream enterprises is beginning to show. When raw materials are depreciate, customers will immediately ask for lower product prices, and the cost advantage of raw materials will be invisible.

Huang Fajing, vice chairman of Wenzhou smoking Association and chairman of sun Feng lighter Co. Ltd., said that the decline of raw material prices is a good news for lighters.

But with a view to the cost of lighters, raw materials account for only about 30%, and the cost of labor and other 70% is increasing. Therefore, the decline in raw material prices has limited effect on lighters.

Under such circumstances, the depreciation rate of 15% of the euro also made Wenzhou's private enterprises worse.

Wu Jianhai, one of the founders of Cameroon overseas Chinese business association and chairman of Cameroon's "China Mall", said that after the US subprime mortgage crisis, the euro depreciated rapidly. In October 28th, the euro's central price of RMB was reported to be 8.489 yuan, a new record low, which was about 15% lower than the 10 yuan in early September. "This will be a fatal blow to Chinese enterprises".

Wu Jianhai has said that the depreciation of the euro has a great impact on his "China Mall". There are seventy or eighty Chinese merchants in the mall, and half of them are expected to face losses, and half of them are barely guaranteed.

In the short term, the depreciation rate of the euro has been much larger than that of the profit margins of Chinese businesses and enterprises.

Coupled with the lagging effect of exchange time, many Chinese enterprises and businesses lose more.

Wu Jianhai said that all profits are not enough to eat now, which has never happened before.

Under the helplessness, some businessmen can only complain about why the renminbi does not depreciate with the euro.

The most fatal thing is that when companies are busy living to reduce losses, they suddenly find that stable overseas orders a few months ago seem to disappear after October.

Wu Jianhai said, in a month or so, the general enterprise orders at least more than 30%, and some small businesses even grain loss.

Those shoes and garment enterprises which mainly rely on the European and American markets have already stopped production or substantially reduced production.

According to people familiar with the matter, a large shoe leather enterprise in Ruian, Rong Guang group, had to go on holiday for 3 days without order.

There are signs that the development of events is much more serious than people think.

Wenzhou city development and Reform Commission researchers pointed out that this year, Wenzhou's economic growth will decline sharply. This year, from 1 to September, Wenzhou's GDP growth rate was 9%, which was 3 percentage points lower than the estimated 12% at the beginning of this year.

From the perspective of foreign trade, Wenzhou's foreign trade increased by 15.9% in the first three quarters of this year. The exchange rate of RMB against the US dollar was reduced, plus the increase of CPI, which was almost zero.

An enterprise loan officer of Wenzhou branch of the Bank of China said that the financial crisis had a direct impact on Wenzhou. The city's economic and Technological Development Zone has closed down and closed down more than 700 enterprises, accounting for 10% of the total.

Moreover, in the latest survey, the profits of Bank of China's top ten auto and motorcycle companies, which were crediting by the Bank of China, actually dropped by 50%.

China Export and Credit Insurance Corp Wenzhou Office recently disclosed that in the first three quarters of this year, the Wenzhou foreign trade export loss case handled by the office involved a total amount of US $2 million 100 thousand, an increase of 92% over the same period last year. In these reports, 1/3 came from the United States, and 1/4 came from the European Union.

In addition, Wenzhou's only US listed company's share price has shrunk by more than 7.

Zhou Dewen believes that by the October global financial turmoil, there will be a large number of small and medium enterprises in Wenzhou to close down and stop production.

Ding Mingrong, the boss of Ruian BD commutator Co., Ltd., said he attended the Canton Fair in October and found that foreigners were much less than last year, and orders fell by more than 30% at least.

Especially those processing export oriented enterprises, the days were really bitter, no orders and no foreign debts, "stop production, run away".

It is understood that at present, private enterprises in Wenzhou are doing everything they can to save themselves, but the actual effect is rather limited. The main reason is that the situation is changing rapidly and enterprises are unable to cope with it.

"In the case of skyrocketing material prices, who said there is a way to make a big talk", Yu Wen pin, vice chairman of Zhejiang electrical industry association and chairman and President of xingle Group Co. Ltd., said that how to reduce losses has become the main way for many Wenzhou private enterprises to save themselves.

Over the past year, many Wenzhou enterprises have chosen futures hedging to seek self-help.

Futures hedging refers to the futures traders who buy or sell a certain amount of spot commodities in the spot market, sell or buy futures commodities with the same price and different futures, but make up the losses in another market by making profits from one market, so as to avoid the risk of price fluctuation.

Zheng Baole, chairman of Wenzhou five star copper industry, said that in September of this year, he felt that the market was not right, so he took short hand on 1/3's copper material.

Now the decline in copper prices can not be changed in the short term, but enterprise risk has been reduced, "at least keep the 1/3".

As to why not all of them are short, Zheng said that no one dared to put all his treasures up like a gambling without knowing whether to win or lose.

Chen Xiaoyu, general manager of Zhejiang Zhongda futures Wenzhou business department, said that after the global financial crisis, the business owners of the business department increased by more than 30%, mainly knowing how to hedge the raw materials.

There was a business owner who sent his son and daughter to the central and futures business department for a month.

Some enterprises are "reducing their burdens" to save themselves.

Yu Wenpin said that in the period of economic instability, it is most important to reduce material inventory and ensure cash flow security.

"Although the book is a loss, but as long as the enterprise is still alive, there will be a turning day."

"The impact of self help is limited," an industry source said. The most important thing is that although banks have increased loans to SMEs, some private enterprises still reflect "no money" under the guidance of local "industrial upgrading" policy.

Zheng Baole said that the sharp reduction of raw materials this year will make him not optimistic about the market trend of next year. "The speed of enterprise development will definitely be affected next year, and the reduction of orders from downstream enterprises will also increase. The only way now is to" do well in self-help and take a step forward ".