On August 29, according to a report by the well-known domestic media China Business News: “I thought it would fluctuate around 6.8 for a while, but I didn’t expect it to break through 6.9 so quickly.”
After the central bank unexpectedly cut interest rates, the RMB depreciated rapidly from around 6.7. On August 24, data from the China Foreign Exchange Trading Center showed that the central parity rate of RMB against the US dollar was at 6.8388. The onshore RMB and offshore RMB exchange rates against the U.S. dollar were reported at 6.8351 and 6.8582 respectively, which were the lowest in the past two years and depreciated by approximately 7.5% compared with mid-April.
This year, the textile market has been stuck in a “stagnant” situation. The market lacks the injection of good news, and companies are operating conservatively. The entire market is “not prosperous in the peak season and not weak in the off-season.” The sharp depreciation of the RMB this time is undoubtedly a “red envelope” for textile companies. According to estimates, for every 1% depreciation of the RMB exchange rate against the US dollar, the sales profit margin of the textile and apparel industry will increase by 2% to 6%, and the benefits of companies with a high proportion of exports will be more obvious.
The exchange rate has always been an issue that foreign trade people are more concerned about, but this year because the market has been tepid, the devaluation of the RMB has not shown obvious benefits now. Foreign trade orders have a 2-3 month payback time. If If the exchange rate can maintain this trend, it will definitely be a benefit to foreign traders in the long run, both in terms of receiving orders and making profits. But is this really the case?
Meng Zhuo, manager of a clothing foreign trade company in Anhui Province, told China Business News that due to the recent significant decline in the RMB exchange rate, they have decided to suspend the operation of locking the exchange rate for all orders at the end of this year.
Foreign trade companies proactively cut prices to stabilize orders
“Although the company’s performance was good, it felt that its stamina was obviously lacking after July, and it was already obvious by early August.” As a sales leader who is always on the front line, Meng Zhuo said frankly that judging from the current domestic and foreign markets, The foreign trade situation is not too optimistic.
After suspending the foreign exchange lock for the next orders this year, they plan to carry out 30% to 50% foreign exchange lock operation for orders exceeding US$500,000 from March to April next year.
RMB exchange rate central parity chart. Source: Central Bank
“Our performance has declined this year, so we will take the initiative to reduce prices. Foreign customers are generally unsaleable, and some large customers will also ask us to reduce prices.” Du Chuankui, head of Shanghai Xinbi Industrial Co., Ltd., told China Business News that during the global epidemic, we gained two Although their orders have increased, their performance has begun to decline this year, with a rate of nearly 35%. In addition to the depreciation of the RMB, the prices of raw materials that had been rising have also dropped by 15% to 25%. Therefore, in order to “grab orders”, they have recently been accurately calculating costs and trying to find the most appropriate price reduction ratio.
Du Chuankui said that the company has planned to proactively reduce prices for customers by about 10% in mid-September. This is an adjustment based on a cumulative 20% price increase for customers in the past two years.
Zhao Benzhi pointed out that the most practical difficulty encountered by foreign trade companies was the delivery delay problem caused by poor logistics before this year. This directly caused some buyers to accumulate inventory, which is bound to significantly reduce the order volume for the next quarter. This is their The biggest concern right now.
Since their main business is the foreign trade of clothing made from recycled materials, compared with traditional textile foreign trade, Zhao Benzhi’s orders are relatively less affected by the overall environment. However, clothing products are divided into seasons, and it is difficult to recover lost time. “Once the spring and summer products miss the sales season, they will not be able to continue selling them when autumn and winter come, and they will have to wait until the spring and summer of the following year. This will have a huge impact on the occupation of funds and the purchase volume of orders for the next season. .”
Charter flight “snatching” continues
According to data released by the General Administration of Customs, in the first seven months of this year, my country’s total foreign trade import and export value was 23.6 trillion yuan, a year-on-year increase of 10.4%. Among them, exports were 13.37 trillion yuan, a year-on-year increase of 14.7%.
Wei Jianguo, former vice minister of the Ministry of Commerce and vice chairman of the China Center for International Economic Exchanges, previously told China Business News that the development of foreign trade must increase efforts to “grab orders” and focus on solving related problems such as logistics and port stagnation. “The competition for orders is mainly with Southeast Asian and Latin American countries.” Some rely on quality and service, but also rely on price advantages and after-sales services. Ningbo, Yiwu and other places in Zhejiang have opened up overseas trade companies to grab orders or receive foreign businessmen. The precedents of charter flights for purchasing in China are of great reference value.
On August 30 and September 21, the second batch of Ningbo business charter flights to Europe will depart again, helping companies to explore the international market while ensuring the smooth return of foreign traders who go overseas to grab orders.
On the afternoon of August 28, Yiwu’s third international buyer charter flight this year took off from South Korea and arrived at Hangzhou Xiaoshan Airport carrying 163 people. Prior to this, the 107 foreign businessmen from India and 163 foreign businessmen from Pakistan who arrived in Hangzhou on chartered flights on August 9 and at the end of July respectively have ended health management measures such as centralized isolation and home monitoring.The offline store shopping and large-scale purchasing models in Yiwu International Trade City have been launched.
On August 24, 49 foreign businessmen from India and Pakistan came to Yiwu International Trade City with orders and started their offline purchasing journey. Pakistani businessman Asif Hamid said on the same day that three containers were being shipped out as soon as possible, and there would be more than five containers of goods waiting to be shipped out in the next week. Rocky, an Indian businessman, also said that his overseas customers have placed many orders for new products, and all he has to do is confirm the price and finalize the order in Yiwu.
On the same day, Securities Times reported:
On August 29, Sun Xiao, spokesman for the China Council for the Promotion of International Trade and secretary-general of the China Chamber of International Commerce, said at a monthly press conference that a recent questionnaire survey conducted by the China Council for the Promotion of International Trade among more than 500 companies showed that the main difficulties currently faced by companies are The problem is slow logistics, high costs, and few orders. 56% of companies said that raw material prices and logistics costs are high. 62.5% of companies said that orders are unstable, with more short-term and small orders and less long-term and large orders.
Sun Xiao said that the demands of enterprises mainly focus on maintaining the stability and smooth flow of international and domestic logistics, implementing relief and assistance policies, and facilitating cross-border personnel exchanges. Some companies are looking forward to resuming domestic exhibitions and liberalizing overseas participation in order to obtain more orders.
Sun Xiao also said that in the past three months, with the effective control of the domestic epidemic, especially the accelerated implementation of the national economic stabilization package, foreign trade import and export have stabilized and rebounded, and business expectations and confidence are gradually improving.
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