Depreciation Of The Euro Eroded China's Small Profits

The depreciation of the euro has eroded the meager profits of Chinese exporters.

"From the Canton Fair to now, 100 thousand of the euro order will lose nearly 100 thousand yuan, and the company's orders for settlement in euros are almost all losses." Zhang Mingyue, President of Guangzhou Dongguan Mingyue Garments Export Co., Ltd. is rather depressed on the phone.

Export enterprises that have just experienced a breath of foreign trade are now stuck in devaluation by the euro.

When the deadline was June 4th, the euro exchange rate was 1: 8.3072. Due to the impact of the European debt crisis, the euro has been sliding against the RMB exchange rate for about half a year, and its depreciation has reached about 15%, which has caused many domestic and foreign trade enterprises to panic.

Bargaining, postponement of orders, exchange settlement... Faced with the trust crisis of the euro, although a number of export enterprises have tried to save themselves, a considerable number of enterprises have suffered losses. But exporters are more worried about the impact of the debt crisis. In the second half of the year, European orders have shrunk, resulting in no time for businesses to do so.

As one of China's largest export markets, the debt crisis has led to the worry of the "two bottom finding" of the world economy. In May 31st, Premier Wen Jiabao visited Tokyo, Japan, and pointed out that although the world economy began to stabilize and recover, its recovery was slow, and the world economy still had the possibility of "two bottom finding". This is the first time China's top leaders issued the "two bottom" warning this year.

Export enterprises are locked up

Zhang Mingyue, who is accustomed to the race against the exchange rate, has lost a lot of money in the face of the recent "falling". Zhang Mingyue exports mainly to women in Dongguan's foreign trade enterprises. The annual export orders to Europe account for 1/3 of the company's total orders.

At the beginning of this year, Zhang Mingyue signed a 500 thousand euro clothing order, which required 3 months' delivery. According to the exchange rate at that time, 100 thousand euros could be exchanged for 979 thousand and 700 yuan, but at the time of delivery, 100 thousand euros could only be exchanged for RMB 850 thousand yuan. The value of the order of 500 thousand euros, the loss of exchange rate fluctuations only 600 thousand yuan. "After the Christmas last year, the euro depreciated sharply. At that time, the exchange rate between the euro and the RMB was 1: 10.2, and now it is 1: 8.3. In the 5 month period, the euro has fallen about 20% against the renminbi. Do you think this business can still be done?"

Zhang Mingyue is not alone. According to the survey, some foreign trade enterprises were worried about losing the RMB against the US dollar at the end of last year.

In the 107th Canton Fair, the volume of orders showed a resumption of growth. But after 1 months, European orders in the hands of exporters have become "hot potatoes". At the beginning of the Canton Fair in April 15th, the euro exchange rate was 1 to 9.3, but after less than a month, the euro fell to a base point against the RMB exchange rate, which is currently 1: 8.3. If we calculate with a 100 thousand euro order, we will lose 100 thousand yuan directly due to exchange rate changes.

"The situation is a bit similar to the taste of the global financial crisis at the end of 2008." Lu Longsheng, general manager of Shanghai Pegasus import and Export Co., Ltd., told reporters. The appreciation of the renminbi against the euro has already eaten away the profits of the enterprises. Many enterprises only take orders to keep their customers.

Take orders or destroy orders?

In the face of the exchange rate risk caused by the continued depreciation of the euro, we will not make money without paying the bill. Zheng Mingmin, Secretary General of Qingdao textile and Garment Association, told reporters that small and medium-sized textile enterprises had low profits and the average profit did not exceed 10%. In recent months, the euro has depreciated in disguised form 14%-15%, which basically offset the profits of these enterprises.

Wang Tao, the business manager of Zhejiang's beautiful children's shoes export enterprise, told reporters that on the newly settled Canton Fair, they signed a contract with a Spanish company for a period of six months. Because the euro devaluation is more severe, they plan to postpone delivery, hoping to bet on the appreciation of the euro by dragging their time.

Wang Tao also told reporters that there are few regrets in the industry at present, mainly because they are afraid of losing customers, so even if they know that the order is losing money, the company must insist on delivery, and then try to find a way through the subsequent orders. "Now the foreign trade enterprise receives the order is this situation, does not have any enterprise to guarantee that all orders are all making money, so long as the entire year calculates does not lose money to be good."

The reporter learned from the interview that some export enterprises with relatively large scale and relatively strong bargaining power can also adopt the way of bargaining to deal with the problem of exchange rate fluctuations. Of course, this way of raising the price of products to make up for the fluctuation of exchange rate is often faced with the risk of order loss. And those small and medium-sized enterprises can only choose not to take orders, or only pick up small bills and short lists to avoid exchange rate risks.

Liu Shangfu, general manager of Zhenyuan foreign trade company in Humen, Dongguan, told reporters that at present, their company simply did not take orders from the euro area, because "rather factories can not start up or lose money."

Exports to Europe declined in the second half

Compared with the losses caused by the depreciation of the euro, what companies are more worried about is a sharp decline in European orders in the second half of the year. Last year, China exported $236 billion to the EU, accounting for 19.7% of its total exports. The products mainly include mechanical and electrical, electronic products, textile, clothing, shoes and hats, etc. electromechanical products account for about half of the sales volume of export products. The main export areas are Portugal, Ireland, Italy, Greece and Spain. If the situation can not be reversed, China's economic growth is likely to slow down.

Huo Jianguo, President of the Ministry of Commerce's international economic and Trade Research Institute, told reporters: "in April, the growth rate of China's exports to Europe remained at 25%, but the reaction may be lagging behind. In 5-6 months, especially in the three quarter, the reaction will be more obvious, and it is likely to drop 6-7 points. "

Although the impact of the European debt crisis on foreign trade has not yet been concentrated, at present, Greece, Portugal, Spain, Italy, Britain and other countries have begun tightening policies, which will cause the shrinking of the European market and the export situation is likely to deteriorate further.

The continued weakening of the euro has attracted high-level attention. A few days ago, Vice Premier Wang Qishan said that China is paying close attention to the adverse impact of the European debt crisis on China's recovery of external demand, while Premier Wen Jiabao made the first mention of the possibility that the world economy still has a "two bottom finding", and is also seen as a relaxed policy environment for China.