How to guarantee orders in foreign trade
Liu Yongbin has always felt "very confused" since the beginning of the year, which is a rare feeling in business for more than 20 years. He is the general manager of a household electrical appliance enterprise in Guangdong. The company produces medium and high-end cooling fan products, which are sold to the United States, Southeast Asia and other countries. Now, he has decided to switch to the production of outdoor products and pet dryers.
"Profits are getting thinner and thinner." Liu Yongbin said that due to the doubling of raw materials and shipping costs, coupled with the appreciation of the RMB last year and other factors, the advantage of "high quality and low price" no longer exists, and the order volume also decreases.
Shaoxing textile owner Qin Bo and Guangdong furniture businessman Zhang Yuanqing also faced similar problems to varying degrees. The order volume of Qinbo's factory in the first four months decreased by 20% ~ 30% compared with the same period last year, and the payment collection cycle also increased by two months. Zhang Yuanqing believes that the difficulty now is "increasing income without increasing profits".
According to the import and export data released by the General Administration of customs, China's exports grew by 3.9% year-on-year in April, down sharply from 14.7% last month. From the perspective of industry, according to the analysis of China mechanical and electrical products import and Export Association, the export volume of mechanical and electrical products increased slightly by 0.11% year-on-year in April. Although it maintained positive year-on-year growth for 23 consecutive months, the growth rate was significantly lower than 11.4% in March, which was also the lowest growth rate since June 2020. In the labor-intensive field, the export growth rate of textile products, furniture and clothing also fell sharply.
Behind this is the actual situation of countless foreign trade enterprises. The industrial production order in the Pearl River Delta and Yangtze River Delta has been disrupted due to the epidemic, with continuous pressure on logistics, raw materials and rising costs. Due to the obstruction of the supply side, overseas orders and customers have lost. At the same time, the export of labor-intensive products in Southeast Asian countries such as Vietnam increased significantly year-on-year in March and April. According to the analysis of Huachuang securities, in March this year, China's export share has dropped to the same level as in March 2021, and the regions dominated by Southeast Asian economies have basically "made up" China's export share. Mexico, Turkey and other places have also become popular destinations for capacity and order transfer due to their geographical convenience from European and American countries.
However, most respondents believe that this is only a short-term impact, and the industrial chain has not completely moved out. As one of the "troikas" driving economic growth, how to stabilize exports is of particular concern to all parties.
Demand weakening and order outflow superposition
Liu Yongbin entered the household appliance industry in 2001. He has several factories in Guangdong and employs more than 300 people. 95% of the company's products are exported and OEM for foreign brands. Medium and high-end cooling fans are transported to the United States and Southeast Asian countries through ports such as Shenzhen and Nansha.
In the past, these middle and high-end cooling fans priced at $300 to $500 could bring him 15% ~ 25% profit. Liu Yongbin said that the largest customers are in the United States. They have strong purchasing power, have a premium on goods, and the profit can reach 25%.
Chinese products have always been known for their high quality and low price. "The power cord certified in the United States can be bought for $6 locally and $1.50 in China." Liu Yongbin said, but now some advantages have been basically erased.
The first is the rise in shipping prices. In the past, the freight of a container to the United States was $2000 or $3000, but now it has risen to more than $20000. As the mode of FOB (customer pays freight) is basically adopted, the customer's willingness to place an order is weakened.
Transport efficiency is also decreasing. On April 29, Liu Yongbin sent a batch of goods from Nansha port to Vietnam and didn't sail until May 3. The backlog of containers will increase the cost of thousands of yuan a day. When the epidemic broke out in Shenzhen in March, 2 / 5 of the goods originally exported through Shenzhen were transferred to other ports. "The warehouse explosion in other ports affected the efficiency. In the past, the customs declaration could be issued immediately. At that time, it could not be discharged for two days."
Affected by transportation cost and efficiency, customers tend to choose merchants with geographical convenience. Due to the large volume of household appliances, they are also relatively affected by transportation costs. Liu Yongbin said that only 900 cooling fans are installed in a container, which is apportioned according to the freight of 140000 yuan. The shipping cost of a cooling fan alone is nearly 160 yuan. Liu Yongbin's international competitors mainly come from Vietnam, Mexico, India and other places, especially from Mexico. "Now it takes a month for Chinese products to be transported to the United States, while it takes only one day for Mexico to be transported to the United States through the US Mexico highway. Even if it is 10% or 20% more expensive than made in China, it also has the advantage of timeliness." He said.
Huang Zhiyong is the general manager of Shenzhen jieerte International Logistics Co., Ltd. the company's business is responsible for transporting goods from factories to ports in Shenzhen and other places. "There have been a lot of new situations since the epidemic," said Huang Zhiyong. I have never heard of the case that containers can't enter the wharf before. "Now the shipping schedule often delays the arrival time, resulting in the non delivery of wharf goods and the accumulation of goods." He said that the wharf used to be stacked with six containers, but now it has been stacked with eight, which can't be put down.
The accumulation of containers does not mean that the order is broken. In fact, it is just the opposite. "Our business can clearly reflect the good and bad of export business." He told reporters that in the past, when the efficiency was high, a driver could run two orders a day, and more than 60 drivers could run more than 100 orders a day on average. Since this year, he estimated that the business has decreased by nearly 50%. Now half of the transportation vehicles are stopped.
According to the survey conducted by China Chamber of Commerce for import and export of mechanical and electrical products on more than 500 enterprises participating in the Canton Fair in April, 47.2% of enterprises' orders on hand decreased compared with the spring and autumn of last year, and only 12.6% of enterprises said that their orders increased year-on-year. Poor international logistics (84.5%) and raw material prices (80.1%) are still the two most prominent problems reflected by the surveyed enterprises, resulting in obvious compression and dilution of enterprise profits. 57.5% of enterprises said that the export profit margin was lower than the average level of last year.
Liu Yongbin's export volume last year was about 70 million yuan. He was not optimistic about 2021. However, due to the repeated suspension of work in various regions of the world affected by the epidemic last year, Chinese enterprises with better epidemic control produced normally, but the operation effect was good. In the first four months of this year, orders decreased by 1 / 3 compared with the same period last year. "This year is expected to reach only half of last year." He said falling profits have led him to focus on the outdoor sports and pet market.
Gao Shiwang, director of China Chamber of Commerce for import and export of mechanical and electrical products, told reporters that there are many reasons for the slowdown in exports. With the normalization of the epidemic, the demand for some household products with high value returned to normal, and the substantial growth of some durable consumer goods in the early stage of the epidemic overdrawn some markets; Raw materials, labor and logistics costs remain high, and enterprises' willingness to receive orders is weakened; In addition, the proportion of independent brands exported by some industries in China is still low, and the exports of small and medium-sized enterprises are almost FOB OEM. With the rise of processing and manufacturing costs and high shipping costs, the demand is weakened, and the order outflow and capacity transfer are superimposed.
Even the once hot cross-border e-commerce in the past is also facing challenges. Wang Xin, President of Shenzhen cross border E-Commerce Association, said that due to the new regulations issued by e-commerce platforms such as Amazon, the orders of Chinese sellers have been declining since last August. According to the survey of the association, 23% of enterprises have no new orders or cancelled orders recently, and 16% have difficulties in survival.
Profits are being squeezed
Compared with the higher profit margin of mechanical and electrical products, textile and furniture have always been industries with thin profits.
In the first four months of this year, the order volume of Shaoxing textile owner Qin Bo decreased by 20% ~ 30%. "The collection cycle is greatly affected," Qin Bo said. The fabrics he exports are paid by the customer as a deposit and the rest after receiving the goods. Now, the collection cycle has also increased because of the longer transportation time.
In the past, it only took three or four days for the fabrics made in Shaoxing to be transported to Europe and the United States. The whole cycle from receiving orders, producing goods, delivering goods to customers receiving goods was about two months. Now, due to the obstruction of transportation at home and abroad, in terms of production, the transportation time of yarn and other raw materials required by fabrics increases; The shipping time has also been extended. Qin Bo estimated that the whole cycle has been increased by two months in total.
A longer trading process means more capital is needed to operate. Qin Bo said that compared with the past, it now needs to spend 30% more capital turnover. The interest of this part also increases the cost of the enterprise.
In addition, the appreciation of the RMB and the depreciation of the US dollar throughout last year also reduced the purchasing power and willingness of foreign customers to place orders. Raw materials continued to rise, shipping costs increased, and local power and production restrictions increased production costs, which were also reducing profits.
"Shipping costs have risen tenfold." Qin Bo said that in addition to the FOB (customer pays freight) mode, the company also adopts the CIF (export enterprises bear freight) mode, which means that enterprises have to absorb the costs. The shortage of container supply also makes enterprises need to pay in advance to book containers. "In the past, 2000 yuan a container and 10 containers a month could be done as long as 20000 US dollars. Now it is necessary to pay 200000 US dollars in advance to book, which is a large part of the expenditure for enterprises."
The textile industry is a less profitable industry. Qin Bo estimates that the profit margin is about 5%. "After working hard for a year, I find that I have no money to earn and may even lose money." He said that sometimes it doesn't matter whether the order is received or not, but the customer still needs maintenance.
"I just hope the current situation can change." Qin Bo said that in the plight of one or two years, those who can wait have strength, and many enterprises that can't hold on have closed down. This year, although the RMB continued to depreciate, Qin Bo found that market demand had declined. "European and American customers don't want to take risks. If the goods are received too late, they will reduce their orders."
Liu Yongbin also felt the decline in profit margins caused by rising costs. He signed a contract with his customers once a year. Since the epidemic, due to the rise in the price of bulk commodities, the cost of raw materials has increased by more than a dozen points, but he still had to perform the previous contract, resulting in thin profits. "There are also contracts this year, but the customer asked for a price reduction of $10, that is, about five points." He said that due to the increasing cost and shrinking profit space, the operation is becoming more and more uncontrollable.
Guangdong furniture businessman Zhang Yuanqing also encountered the problem of longer payment collection cycle. "The customer order cycle has changed from once a month to once every two or even three months, and the capital turnover has slowed down by about 2 / 3."
His main products are office furniture, card holders and other products, which are mainly sold to Japan and the United States. The middle and low-end desks sell for 1000-1500 yuan. Due to the large volume and low value of furniture, with the rise of sea freight, the freight used to account for only 30% ~ 40% of the goods, which is now the same as the value of the goods.
This further diluted profits. "The threshold of the furniture industry is low, the technical content is low, and the profit margin is about 4% ~ 7%." Zhang Yuanqing said that in contrast, the factory rental business of industrial land operates better. He is the second-generation person in charge of the family business. The family has worked in the furniture industry for more than 30 years and opened the middle and low-end furniture market in Europe and America. However, he does not intend to invest more in industry in the future because "industry does not make money".
Wang Xin, President of Shenzhen cross border E-Commerce Association, believes that due to the reduction of market demand, enterprises choose to keep reducing costs, resulting in thinner and thinner profits and difficult to improve product quality.
How to grab orders?
While China's export growth has slowed down, the export growth of Southeast Asia has increased significantly since this year. Since March, Indonesia's exports have increased by more than 40% year-on-year, Vietnam by more than 30%, and Malaysia, Thailand and the Philippines by about 20%.
Several business owners told reporters that recently, orders have been transferred to Southeast Asia, Mexico and other regions. However, they are not overly worried about the transfer of orders.
"Southeast Asian countries such as Vietnam can replace part of China, but they will not completely replace China's industrial chain due to the limitation of population base." Liu Yongbin believes that Vietnam's own industrial foundation is weak and its industrial supporting needs to rely on China.
"Just as we could only buy second-hand equipment from Japan before, in the field of household appliance production, many large-scale equipment in Vietnam are also second-hand equipment eliminated by China." Liu Yongbin said that Vietnam's industrial chain is not complete. In Guangdong, there are motor factories, circuit board factories and other industrial chains within 20 kilometers. The materials required for production can be purchased in a short distance. The industrial chain is complete, but Vietnam has not yet developed to the corresponding scale.
Zhang Yuanqing also believes that there is still a gap in resources between Southeast Asia and China in the short term. "Foreign customers like us, including scale, quality and delivery date. Because the metal part includes die casting, stamping and surface treatment, the whole production chain is the responsibility of the enterprise, and the large-scale production can meet the needs of customers for thousands of orders at a time; after the production chain is complete, the quality will also improve, the cooperation degree can be more than 80 points, and the delivery time can be met." Zhang Yuanqing said, but Southeast Asia is gradually catching up.
From the perspective of the textile industry, Qin Bo believes that at present, few fabric orders have been transferred overseas. "The dyeing link in Southeast Asian countries has not been vigorously developed, and the whole industrial chain lacks a key link." Qin Bo said that due to environmental factors, relatively few clothing orders have been transferred to Southeast Asia.
According to the analysis of West China Securities, from the analysis of export commodity structure, the types of products with increased export growth of Southeast Asian countries in March and April are mainly concentrated in mineral metals, textiles and clothing and electronic products.
In the field of electronic products, according to the data of China Chamber of Commerce for import and export of mechanical and electrical products, in recent years, the mobile phone industry, which was originally mainly concentrated in China, showed a trend of outflow of orders and production capacity. The share of Chinese mobile phones in global production capacity fell from more than 90% at the peak to about 70% last year. In order to actively open to the outside world and attract foreign investment, countries represented by India and Vietnam have implemented various tax preferences and become the main inflow areas.
On April 11, Apple announced that it would produce its best-selling iphone13 in India, which would be assembled by Foxconn and Wistron, and be oriented to the local market in India and overseas markets such as the United States. Also in April, China's exports of mechanical and electrical products to India increased significantly, indicating the recovery of India's electronic manufacturing industry after gradually getting rid of the epidemic. Due to the large population base and high potential market demand, India has attracted Samsung, Foxconn, Xiaomi, oppo, vivo, Yijia and other manufacturers to set up factories locally, and the local industrial supporting facilities have been gradually improved.
Gao Shiwang, director of China Chamber of Commerce for import and export of mechanical and electrical products, believes that since China joined the World Trade Organization in 2001, the global industrial chain, especially the terminal manufacturing link, has been a division of labor and cooperation focusing on China. In the electronic information industry with prominent international division of labor, China's exports of computers and mobile phones account for a high proportion in the world, but they are mainly concentrated in the processing and assembly links with low added value, while the upstream capital intensive and technology intensive integrated circuits, semiconductors and other fields are relatively dependent on imports.
"Based on cost considerations, the processing and assembly links that are more sensitive to labor costs have an internal trend of transferring to countries with low labor force such as Vietnam and India." Gao Shiwang said that at the same time, China should also follow the original industrial upgrading path of the four little dragons in Asia, and extend upstream by attracting foreign investment and independent technological upgrading.
People familiar with the mechanical and electrical products industry told the reporter that at present, the friction between big countries and the COVID-19 have a far-reaching impact on the adjustment of global industrial layout. Emerging countries such as India have put pressure on the outflow of China's low value-added links, while developed countries are more likely to use supply chain security as an excuse to guide the return of high-tech industries or circulation among developed countries through industrial policies, and at the same time limit the expansion of high-tech enterprises' investment in China.
Bai Ming, deputy director of the International Market Research Institute of the Research Institute of the Ministry of Commerce, told reporters: "Since March and April, the Pearl River Delta and Yangtze River Delta have been greatly affected by the epidemic, and the two places are important foreign trade cities in China, which has a serious impact on the industrial chain in the short term. However, the impact of the epidemic on the global industrial chain is not released regularly. The international industrial chain has been impacted repeatedly, but the impact points are different each time. In the long run, the epidemic is only one of the factors affecting the industrial chain and supply chain."
Bai Ming believes that Southeast Asian countries are small and difficult to produce sufficient economies of scale, but ASEAN integration can also accelerate industrial supporting. For labor-intensive foreign trade enterprises, they can transfer to the central and western regions and northeast regions in the future, or implement the industrial going out strategy, and extend to Southeast Asia, Mexico and other regions on the premise that the industrial chain is still controllable and independent.
"We have passed a period of brutal growth." Liu Yongbin said that for the second half of the year, he expected that the recovery would not be too fast, and the export volume this year is expected to be only half that of last year. China Chamber of Commerce for import and export of mechanical and electrical products predicts that the export growth rate will still fall in the second quarter. Affected by poor shipping and rising raw materials, especially from March to April, the shutdown caused by the epidemic in Shanghai, Shenzhen, Qingdao and other places will have a direct impact in the second quarter.
According to the expected survey of Shenzhen cross border E-Commerce Association on cross-border e-commerce in the next three years, more optimistic enterprises account for 40% and less optimistic enterprises account for 30%. However, Liu Yongbin believes that the cost of raw materials has fallen recently, the sea freight has also fallen by 30%, and the foreign trade situation has improved with the depreciation of the RMB.
In the face of slowing data, how to "stabilize foreign trade" has become the focus of attention. On May 5, Premier Li Keqiang chaired an executive meeting of the State Council to determine measures to promote the stability and quality improvement of foreign trade, help stabilize the economy and stabilize the industrial chain supply chain, and put forward that "we should focus on ensuring orders and stabilizing the import and export of key industries and labor-intensive industries".
In view of the recent challenge of export order outflow faced by some foreign trade enterprises, the Ministry of commerce also said that it would do everything possible to help enterprises seize orders and expand the market. On the one hand, it would make good use of major exhibitions such as China Import Expo, Canton Fair and service trade fair to broaden the channels for enterprises to receive orders; On the other hand, we will actively support small, medium-sized and micro enterprises to participate in overseas exhibitions and connect with overseas buyers.
Gao Shiwang suggested that in view of the high sea freight and high cost of raw materials, we should strengthen the coordination of international shipping capacity, guide Chinese enterprises to strengthen the operation layout of overseas ports, strengthen the shipping support of state-owned enterprise shipping companies to brand overseas enterprises, guarantee the freight rate and capacity of key industries, and strengthen the stable supply of bulk commodities on the supply side.
Source: China Newsweek reporter / Jiang Zhiyu
|
