China'S Foreign Trade Manufacturers Are Now Pushed To The Crossroads By The Epidemic.

"The situation is very complicated now." Li Fang pointed to a packaged N95 mask. "This is for American customers." She looked a bit dignified. In 1997, he came to Shenzhen from Jiangxi to start her own business. She made the first pot of gold for IC components and has been active in the foreign trade industry. She experienced the Asian financial crisis in 1998, SARS in 2003 and the global subprime crisis in 2008, but this time, she felt that the situation was different from before. The epidemic sweeping the globe is changing everything, including foreign trade and cross-border electricity providers. China's foreign trade sellers are in the center of the storm which is superposed by the epidemic and potential economic crisis.

　 Roller coaster trade Quotes

The world is inseparable from China's goods, and China can not do without the world's procurement.

In 2018, China's manufacturing value added accounted for more than 28% of the world's total, Xinhua reported. A small town called Huangqiao in Taixing, Jiangdu, produced 30% of the world's violins. 40% of the world's glasses are produced in Danyang, Jiangsu. 80% of the world's air conditioners, 90% of personal computers, 75% of solar panels, 70% of mobile phones and 63% of shoes are produced in China.

Foreign trade exports have always been a pillar industry of China's economy. According to the data of the foreign trade department of Ministry of Commerce in January this year, in 2019 1-9, China's net exports of goods and services contributed to 19.6% of GDP growth. The number of foreign trade driven employment is about 180 million, and the import tax revenue contributes 11.6% of the total national tax revenue.

The Southern China District, including Shenzhen, is also China's major export and export destination. According to official data released by Shenzhen, in 2019, the total export volume of Shenzhen was as high as 1 trillion and 670 billion 895 million yuan. In addition to commodities, small single cross-border e-commerce retail is also very active. In the first 5 months, the customs of Shenzhen issued a total of 7 million 860 thousand tickets for cross-border retail sales of e-commerce.

The slow spread of the Spring Festival and the spread of the new crown pneumonia epidemic all over the world have a direct impact on China's foreign trade exports. The General Administration of Customs of China announced in March that "in dollar terms, exports fell by 17.2% in the 1-2 months". "In 1-2 months of 2020, China exported 300 billion 100 million yuan to the US, down 26.5%."

Due to the epidemic, the Canton Fair, which was originally planned for April 15th, will be postponed. Each Canton Fair is the highlight of China's foreign trade, with participants from more than 210 countries and regions and about 200 thousand overseas purchasers. This is the Canton Fair which has held 63 or 126 sessions for the first time. During the SARS period of 2003, the Canton Fair was still held normally.

In front of the Chinese sellers of the takeaway industry this year, the roller coaster market is the same. In 1-2, the domestic supply chain was completely disrupted due to the spread of domestic epidemic. When the plant starts to postpone, workers are unable to return to work normally, suppliers are unable to supply production materials, and factories are unable to start. By the middle of March, when the domestic production capacity basically recovered, the epidemic in Italy, France and the United States began to break out. This has a direct impact on the sales and business of Chinese foreign trade sellers.

　　 Will the epidemic affect more than 08 years of financial crisis?

An analysis of many foreign trade personages is that if the epidemic continues to spread, the impact may exceed that of the 2008 financial crisis.

In Wanda, which has been engaged in foreign trade for more than 10 years, it seems that the epidemic situation in 2020 is quite different from that in the 2008 financial crisis.

From the perspective of the country, subprime mortgage crisis is mainly affected by the developed countries such as Europe and the United States, and spread to other countries. However, the outbreak of the subprime mortgage crisis is rapidly spreading around the world. At present, more than 160 countries have confirmed cases, and all countries are facing great enemies.

From the perspective of the industry concerned, the biggest impact of the subprime crisis is the financial industry and real estate industries.

From the perspective of economic performance, subprime mortgage crisis is a problem of liquidity. Countries solve the crisis by resolving liquidity. The epidemic is an invisible threat to life, causing most industries to be at a halt, and even the basic life has undergone tremendous changes.

But in 2008 and 2020, the cost of production has changed dramatically. In 2008, a worker paid around 2000 yuan, now it is 5000-6000 yuan, and it is difficult to find people. In 2008, the rent of the factory buildings in Baoan was about 10-12 yuan per square meter per month, and now it is about 40 yuan a month, and the price of raw materials is also rising. Ex factory prices are hard to keep up with rising costs.

When the 2019 international trade environment is getting worse, the foreign trade circle is in a state of panic. The circle of friends and the WeChat group are full of uncertain and negative news. At first, foreign trade people including Wanda felt that the end of the world came. Wanda's European and American customers worry that the impact is too big, they are required to go to Vietnam and other countries with low tariffs. Some orders began to flow to Vietnam and other places. But soon, European and American customers responded that Vietnam's supply chain cooperation was not good enough. Vietnam's communication efficiency was low and its service was poor. So some orders began to flow back to China. The whole order was only down by 5-10% after the trade war. Fear tends to magnify pessimism.

China is the only country that owns all industrial sectors. The advantages of the domestic supply chain are large and complete, relatively cheap and fast. Today's manufacturing industry is already an ecological supply chain and deep industrial chain cooperation, and a small commodity can not be completed independently. All partners in the supply chain need to cooperate with each other. A very common line of audio and video transmission, including the core part of the optical fiber, PVC plastic, metal wire, terminal die, tape, outer packaging. Each part needs a supplier and a small processing plant. At least 6 suppliers are needed. If you lack a link, you will not be able to ship. At this point, no country can replace China in the short term. From this point of view, the overall transfer of industrial chain is very low.

　　 Has the closure of foreign trade enterprises come?

Franklin said, the only thing we need to fear is fear itself. "After several previous disturbances, we are optimistic now that the current industry sentiment is pessimistic than the actual situation. The panic was magnified. " After 20 years of work, Li Fang has a deep understanding.

China's foreign trade manufacturers have been pushed to the crossroads by the epidemic. On the one hand, it is a large foreign trade company, and it is not like the large scale stoppage in the legend, or the collapse of the legend. But they digested foreign orders in December last year and January this year.

But on the other hand, the situation of many small and single products and foreign trade factories is not optimistic.

The peak period of foreign trade is usually in December of the first year, in the 1-2 month of second, when Europe and the United States have finished Thanksgiving Christmas, they need replenishment. At the same time, in order to avoid the stoppage of the Chinese new year, they will place an order in advance. And then into the summer is a low season, from September to the peak season.

A foreign trade manufacturer specializing in the production of audio and video transmission lines and HDMI data lines in Shenzhen, Baoan, is now under full load. The company has been established for over 20 years, with over more than 400 workers. There are factories in Shenzhen and the mainland. The products are mainly used in enterprises, hospitals, administrative units, entertainment places, and personal data lines. From product design, research and development, production, sales and other one-stop coverage, the main customers include WAL-MART and other European and American companies.

Their annual output value is around 200 million, with 50% of orders coming from Europe and the United States. Europe and America have more than 15 million orders a month in peak season, but they are already in production at the beginning of this year. New orders have been decreasing since April. According to the analysis of a number of foreign trade personages, according to the spread of the epidemic in Europe and America, it is expected that it will not be eased until August or October. Then the factory will not be able to get orders. If there is an inflection point in June, the whole factory will not be fundamentally affected. If the end of October, the total order loss is more than 40%-50%. The monthly salary of factory workers is about 1400000, the fixed value of rent and water is 300 thousand, and the minimum monthly expenditure is about 1 million 700 thousand. But fortunately, they have already begun to lay the domestic market before.

Executives at a high-voltage electrical company in Wenzhou, Zhejiang, say their work is currently normal. The main products are high voltage electrical equipment for railway and electric power, more than 300 million output value in 2019, 60% foreign trade orders sold abroad, and 40% domestic orders. At present, the production of the whole company has not been reduced. But they all consumed orders at the end of last year. After the order is completed, "because the new orders for foreign trade are not yet available. We are planning to expand domestic market share. "

On the other hand, at present, some of the less competitive foreign trade enterprises have been affected and impacted by the epidemic.

Single customer: most of the output value and orders of a foreign trade factory come from a foreign customer. Such a survival state is actually very fragile. Many large foreign customers are required to sign a price reduction clause. The manufacturer must reduce the buyer's price by 5% a year. There is no room for negotiation. In this case, customers may cough, and manufacturers will catch cold. In March 23, 2020, Dongguan precision watch Co., Ltd. announced that it had been affected by the epidemic, and the US's largest customer, FOSSIL, cancelled its order. The customer accounts for the order of 80% accuracy. Precision shock therapy is implemented: full staff leave for three months, employees can resign at any time.

The product is single: for the foreign trade processing enterprises, the division of labor is becoming more and more detailed. Many companies produce only one part or part of the product instead of a complete product. Excessive single product line, profit mainly depends on processing cost. Basically, there is no key technology and moat in this state, so it is easy to be eliminated or replaced. Once the industry is hit, this marginal producer is the first to be affected. In March 18, 2020, the toy factory of Dongguan, which was established in 1992, announced that it was closed. They once served Disney, HASBRO and so on. The main products are the production and sale of toy clothing, cloth bags and woven bags. What they are doing is just a part of the outer package of toys.

Pure traders: many Chinese sellers in the foreign trade industry are middlemen, without their own factories. Amazon is a typical seller in China. Under the impact of the epidemic, production has an impact. Besides rigid demand, individual consumption in various countries is decreasing, sales are decreasing, and Amazon platform policy changes, multiple attacks.

There is a saying in the foreign trade industry that 50% of Amazon's sellers come from China, and 50% of China's sellers come from Shenzhen. Amazon CEO Geoff Bezos said that sales of third party sellers, including Chinese sellers, rose from 30% in 2008 to 58% in 2018. Sales increased from US $100 million to US $160 billion, a compound annual growth rate of 52%.

On Amazon, clothing is one of the most obvious categories, and textiles and clothing are the most important part of Chinese sellers. Some sellers said, "the company's clothing is mainly based on summer holiday clothes, and it is affected by the epidemic. Recently, foreigners have no plans to take a vacation or cancel it." "At first it was Japan, and after the spread of the epidemic, the European and American market orders began to fall. We used to make 100 orders a day, but now we only have 30 orders at a time.

There are also rising logistics costs affecting cross-border e-commerce sellers. According to convention, the logistics channel of air evacuation (airlift plus distribution) is generally 32 yuan after the Spring Festival, and now it has risen to 40 yuan, up 25%. Even if the price increases, many channels can not be shipped due to overseas epidemic. At this time, Amazon platform's strategy has also been adjusted: "we decided to give priority to our family necessities, medical supplies and other products that need to be entered into our storage center." For commodities other than the above, temporary storage will be suspended. This makes many Chinese sellers have some measures.

　　 Self help of Chinese foreign trade sellers

It is far from clear when the epidemic will turn global. Chinese sellers are cautious about the second half of the year. But life and business must go on. Chinese sellers are carrying out various ways to save themselves:

Open source: Lao Cai, who runs a factory in Baoan, Shenzhen, says that foreign trade factories around him are opening up new channels, including speed sell. The biggest impact is the United States and the European Union, which is the main sales area before Chinese sellers. In 2019, the top four countries of China's import and export trade were the European Union, ASEAN, the United States and Japan. Chinese sellers are also actively developing new customers. Including areas such as Japan, Singapore, India and Australia, which are not affected by policies, explore new opportunities.

The company owner of Wanda has made a prejudgement in advance, and has made a risk distribution layout for the client. In the early years, the 100% foreign trade orders were optimized to 50% foreign trade and 50% domestic market. At the same time, from the original cable channels, expand to the domestic Tmall Taobao business cooperation. In the epidemic, domestic orders are not obvious at the moment.

At the same time, they also strengthened communication with customers, including free masks for customers, appeasing customers, helping European and American customers to make plans, doing local epidemic and business risk assessment, combing business problems and minimizing risks. Together to tide over difficulties. "We must not abandon customers when customers are in trouble."

In the face of excessive non emergency goods, faced with the impact of the epidemic, many businesses began to choose the killer: price reduction. This is a helpless choice, but it is also one of the quickest ways to return capital.

Saving money: saving money has become the most realistic thing. The most direct thing is to cut or stop advertising that has been put before Amazon. Faced with the warehousing problem, a special mode of transportation is adopted. At present, Amazon's policy is restricted to around April 5th, so some sellers calculate the time of cancellation and shipping time, then ship by sea, ship for a long time, large volume of freight, arrive at the time of unsealing, and then enter the warehouse, but this risk is obvious. Once Amazon continues to implement the policy of restricting warehousing, it can only find its own warehouse and find its own logistics and delivery. I can't stay high.

Management: many Chinese sellers have said that this year will shrink the size of the company, reduce the annual business expectations, and even a few of them have begun to close and transfer the company. "The pace of development was not bad before, and the plates were bigger. This year's business objectives will be appropriately lowered. It is mainly to slow down the expansion of the company's existing categories. Take advantage of this time to grasp the quality of the company's internal management. After this outbreak, the risk awareness of foreign trade companies has been enhanced, and the development of new products will be more cautious. "For the long-term development of the company, this is a very valuable experience."

But many bosses say they will not lay off workers blindly. "(layoffs) is a temporary solution, but the key is to find new orders. If there is an order, no workers, it's not worse. "

Policy: at the critical moment, the government's policy support will also stimulate the export and trade economy. In 2008, in order to maintain the stability of foreign trade, from the central to the local level, a series of policies were intensified, including the 4 consecutive increase in the export tax rebate rate. Cancellation or reduction of partial tariffs and deregulation of processing trade. After the outbreak, central and local governments are actively introducing policies to stabilize foreign trade and exports. The Ministry of Commerce and the Ministry of Finance issued a letter, emphasizing that "special funds support stable foreign trade, stable foreign investment, and promote consumption". The Shanghai government has increased its financing support for foreign trade enterprises and encouraged financial institutions in Shanghai to increase support from foreign trade enterprises. But everything is rooted in orders, without orders, machines can not run, there will be no export orders, and export tax rebates on policies will be impossible.

A senior foreign trade official said that an epidemic actually showed the tightness of China and the world economy, and also exposed some drawbacks of China's foreign trade manufacturing. One of them is to follow suit and follow the crowd. Some time ago, masks and other medical supplies were hot, so many people abandoned their original businesses and switched to making masks and other products. Open WeChat foreign trade group or circle of friends, more than 50% of people are pouring medical resources such as masks. Many of the masks produced hastily can not meet the industry standards, and can not be exported to Europe or the United States. These people do not have a long-term plan. Now many mask manufacturers have begun to overcapacity, and are facing new transformation problems.

The more tightly integrated the global economy is, the more frequent fluctuations may occur. But every industry faces huge uncertainties, and new industries and models will emerge. After the financial crisis in 2008, the global industries, including China made, were shuffled. Most of the industries that were located in the low-end manufacturing industry were actively or forced to accelerate industrial upgrading and evolve towards the high end of the global industrial chain. In Guangdong, new industries such as optoelectronics, environmental protection, new materials, new medicine and new energy were all developed rapidly after 2008.

In the view of Lao Cai, the epidemic will end sooner or later, so he still has confidence in foreign trade business. "When the epidemic is over, the market will recover. For US manufacturers, we will still sell Chinese products abroad. But we really need to improve our technology.