Since June last year, the total monthly import and export value of my country’s foreign trade has continued to maintain positive growth, and the overall positive trend of my country’s foreign trade has not changed.
According to customs statistics, in the first 11 months of this year, my country’s total import and export value was 35.39 trillion yuan, a year-on-year increase of 22% and an increase of 24% over the same period in 2019.
However, over the past year, shipping costs have skyrocketed, and it is difficult to find a container. Coupled with the rise in the RMB exchange rate, rising prices of raw materials, and domestic power and production restrictions, the survival situation of foreign trade companies is not optimistic.
“We must be soberly aware that many foreign trade companies, especially small, medium and micro foreign trade companies, are under increasing operating pressure and difficulties. It is common for them to ‘fear to take orders’ and ‘increase revenue without increasing profits’.” said Ren Hongbin, Vice Minister of Commerce.
Behind the rapid growth of China’s import and export scale, the difficulties of small, medium and micro foreign trade enterprises are increasing. When will the turning point come?
Don’t dare to accept orders: I’m busy with new orders and old orders can’t be sent out.
Affected by the epidemic, foreign factories have been under-operated, and orders from South and Southeast Asian countries such as Bangladesh, India, and Vietnam have been transferred to China. But domestic suppliers were not happy. They were overwhelmed with orders and had no time to produce them, so they had to cancel or refuse orders.
Due to the increase in orders, deliveries at the factory are being delayed. Coupled with factors such as the untimely supply of upstream raw materials, they had not completed the August orders in September, and the downstream companies were in a hurry. “The factory has no extra operating space.”
In this case, each new order will undoubtedly increase the risk of compensation for delayed delivery.
In addition to the difficulty in filling orders, it is also difficult to find a container, which also makes foreign trade companies “dare to accept orders.” Since the epidemic, global port congestion has been severe, and containers stranded at foreign terminals cannot return to China in time, leaving companies with no boxes to ship.
Increasing revenue without increasing profits: Enterprises have to shoulder rising costs themselves
Another headache for foreign trade companies is that “the factory looks prosperous, but it just doesn’t make money.” The reasons are:
1. Rising raw material prices are a black hole that eats away profits.
Starting from February this year, raw material prices have increased significantly. Taking textile and clothing raw materials as an example, cotton yarn, staple fiber, and spandex have almost all started rising prices, with cotton prices rising as high as 71.4%.
In addition, since August this year, at least 20 provinces in China have been subject to varying degrees of power rationing. Power rationing also brings about adjustments in electricity prices.
2. The rise in labor costs also affects corporate profits.
Due to the surge in orders, some foreign trade factories have had to recruit more workers to ensure that orders are completed as scheduled, which has also increased the burden on enterprises.
Previous media reports showed that taking garment processing in Ningbo as an example, before the epidemic, the average salary of garment workers was 5,000 to 6,000 yuan/month. This year, the salary of skilled workers has increased to about 8,000 yuan/month; even in inland Jiangxi, the monthly salary of garment workers is only 5,000 yuan/month. It has risen to about 4,500 to 5,000 yuan.
3. RMB appreciation has also significantly eroded the profits of export enterprises.
However, the bargaining power of small, medium and micro foreign trade enterprises is limited. When faced with rising costs, most of them will choose to bear them themselves.
“For contracts signed before the price increase, in order to stabilize customers, they generally have to bear the losses themselves.” A Shenzhen foreign trade practitioner said that for new orders after the price increase, most companies will propose a price increase, but they must also Considering customer affordability, “because the price increase will affect the purchasing power of foreigners, order demand will gradually decrease.”
Ocean freight continues to skyrocket, and orders suddenly turn from overheated to cold
In addition to cost issues, foreign trade companies are also caught off guard by the changes brought about by international shipping.
Since last year, global container freight rates have continued to rise, with container market quotations on some routes soaring to more than ten times.
The sharp increase in sea freight has greatly affected the purchasing enthusiasm of foreign merchants, especially small commodities with low added value. Related orders also suddenly turned from overheated to cold.
In addition, congestion at major ports around the world has also exacerbated this problem. The ship cannot return and empty containers are hard to grab, which will undoubtedly continue to lower the order volume of foreign trade companies. The negative impact of reduced orders may also appear next year.
Ministry of Commerce: A new round of policy measures to stabilize foreign trade will be introduced in due course
At present, the survival situation of small, medium and micro foreign trade enterprises is not optimistic. At a recent press conference of the Ministry of Commerce, Vice Minister of Commerce Ren Hongbin mentioned that there are still problems such as multiple trade risks, rising costs, and supply chain congestion.
“There are still many hidden worries in the development of foreign trade, and we cannot be blindly optimistic.” Ren Hongbin said that the Ministry of Commerce will introduce a new round of policy measures to stabilize foreign trade in due course.
Among them, in order to enhance the ability of enterprises to deal with exchange rate risks, the role of export credit insurance will be further enhanced and foreign trade credit will be solidified.
When will the turning point occur?
Wang Meiting, a researcher at the Bank of China Research Institute, analyzed that the rise in raw material prices is expected to gradually improve in the first half of 2022 as the weather in the northern hemisphere warms up and energy demand falls.
The spread of the global epidemic and the emergence of new mutant viruses have led to a slow recovery in the global supply chain. However, my country’s export growth is still resilient. my country’s busy shipping and insufficient container supply may continue for about half a year.
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