“It’s the summer off-season recently, and orders have already been shrinking. The recent depreciation of the euro has made European customers cautious in placing orders, and the downward trend in orders has increased.” said the person in charge of a shoe and apparel company in Dongguan.
Recently, with the rapid depreciation of the euro and the exchange rate against the US dollar falling below the 1:1 mark, foreign trade companies on both ends of the Eurasian continent have felt quite a shock.
“It is the summer off-season recently, and orders have already been shrinking. The recent depreciation of the euro has made European customers cautious in placing orders, and the downward trend in orders has increased.” Xiao Wendian, the person in charge of Dongguan Yinhui Toys, said.
As the market entity most directly affected by exchange rate changes, Dongguan’s foreign trade companies have experienced more uncertainties. The heads of several companies told Southern Finance’s all-media reporters that due to multiple factors such as the depreciation of the euro and sluggish economic growth in Europe, companies’ foreign trade orders have dropped significantly recently.
On July 22, according to China Business News:
Shiling Town in Huadu District, Guangzhou City is well-known as the “Capital of Leather Goods”. There are eight to nine thousand leather goods manufacturing companies concentrated in the town, most of which have foreign trade business. However, a new coronavirus epidemic has caused The sales of many local foreign trade leather goods companies have been disrupted, foreign trade orders have dropped sharply, and past inventory has become a burden stranded in warehouses. Some companies originally had 1,500 workers, but due to the sharp drop in orders, they had to lay off down to 200 people.
$200 million in orders canceled
Liu Xiangyang, whose main business is foreign trade, soon discovered that the hurricane caused by the butterfly epidemic had caused losses to him – an order with a total value of nearly 200 million US dollars (approximately RMB 1.35 billion) was canceled; Old and stable customers have also canceled their purchase plans due to the epidemic.
“If this order could finally be completed at that time, there would definitely be a profit of tens of millions of yuan.” Liu Xiangyang said.
The first order to test the customs clearance process was quickly issued, amounting to hundreds of thousands of dollars. Next, according to the plan, the country would send people to the factory to handle the production of subsequent orders. Unexpectedly, the epidemic came.
Up to now, even Liu Xiangyang cannot confirm whether the other party will continue to advance this nearly US$200 million order.
“The depreciation of the euro has caused importers to be unable to bear price increases, and many European customers have requested price reductions after placing orders.” Mr. Yu, general manager of Dongguan Boda Clothing Co., Ltd., also said.
Wang Weifan, the person in charge of Guangdong Baotong Precision Technology Co., Ltd., told Southern Financial All-Media reporters that the euro has been changing rapidly recently, and the company will suffer some losses on the orders it received in the early stage. “The euro has depreciated by nearly 5 points. Based on the orders we have received for 2 million euros, if the delivery is settled at the current exchange rate, the loss will probably be around 100,000 euros, which is a very big loss for us.”
“July and August have entered the off-season, which has also had a certain impact on our orders. We have some German customers who recently informed us that this year’s goods will be postponed until early next year, which will also have an impact on our revenue this year.” The person in charge of the hardware foreign trade company said.
“Stabilizing orders” has become the primary challenge for foreign trade companies
The depreciation of the euro affects orders from foreign trade companies.
“The volume of export orders to Europe has declined this year. The important reason is that the international situation is turbulent, the consumer market is weak, and customers are not strong enough to place orders. Generally speaking, orders have been somewhat reduced since May and June.” Guangdong Yuguang Import and Export Group Tan Yizhu, the person in charge of the company, said.
The person in charge of a furniture company in Dongguan said that at present, the company’s foreign trade business is basically settled in U.S. dollars. The depreciation of the euro against the U.S. dollar means that customers have to pay more for each order, so they will naturally be more cautious. This is a problem for export companies. It is disadvantageous.
As a leading toy company in Dongguan, Longchang Toys also showed signs of decreasing overseas orders this year. Liang Zhongming, general manager of Longchang Toys, told reporters from Southern Finance and Economics that the European and American markets have been affected by inflation, trade expectations have weakened, and consumption power has declined. Longchang Toys’ European and American orders have declined recently.
Many Chinese businessmen in Europe said in interviews with reporters from Sino-Singapore Jingwei that they have personally experienced the “cold wave” caused by the depreciation of the euro. “It can be said that the losses are huge, and Chinese businessmen are trying to find ways to get out of the predicament.” On the evening of the 13th, Beijing time, Jin Shaojie, president of the French Chinese Garment Industry General Chamber of Commerce, said in an interview with a reporter from China-Singapore Jingwei.
Lin Maofeng, president of the Zhejiang Overseas Chinese Entrepreneurs Association in Milan, also revealed that against the backdrop of the depreciation of the euro, some Chinese businessmen engaged in international trade have changed the place of purchase back to the country where they are located. “Some Chinese businessmen even urgently canceled their orders when their goods were still on the way and they saw the euro falling.” Lin Maofeng said.
The euro may still continue to depreciate
Agence France-Presse said on the 18th that due to high inflation and economic downturn, the European Central Bank will announce this week its first interest rate increase since 2011. Analysts from Germany’s Berenberg Bank recently issued a report saying, “The euro-dollar exchange rate is in free fall, with no bottom in sight yet.” Analysts said market participants’ price targets for the euro exchange rate are between 0.98 and 0.90. .
The market’s expectation that the euro will continue to fall also means that domestic and foreign trade companies still need to prepare for exchange rate changes, reduced orders and other issues.
Foreign trade in the second half of the year will still behope for stable growth
According to Shanghai Securities News:
“Currently, the development of foreign trade still faces some unstable and uncertain factors, and there is still a lot of pressure to maintain stability and improve quality. However, we must also note that the fundamentals of our country’s economy, which is highly resilient, has sufficient potential, and has long-term growth, have not changed.
With the implementation of the national policy package to stabilize the economy and the resumption of work and production in an orderly manner, foreign trade is still expected to continue to maintain steady growth. Li Kuiwen, spokesperson of the General Administration of Customs and director of the Statistics and Analysis Department, previously said at a press conference of the State Council Information Office.
Ministry of Commerce spokesperson Shu Jueting said at a recent regular press conference that in the next step, the Ministry of Commerce will give full play to the role of the unimpeded trade working group, make good use of signed free trade agreements, and guide companies to accurately explore international markets.
It is necessary to cultivate new growth points for foreign trade and encourage innovative, green, and high value-added products to open up international markets. Continue to expand new business formats and models such as cross-border e-commerce, overseas warehouses, market procurement, comprehensive foreign trade services, bonded maintenance and remanufacturing.
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