“Lao Foreign Trade” reminds peers: Exports must be wary of exchange rate risks
Recently, the General Administration of Customs released my country’s foreign trade import and export data for January. Statistics show that in the first month of 2016, my country’s textile and apparel exports totaled approximately US$24.131 billion, a year-on-year decrease of 5.53%, basically maintaining the export trend in 2015. From the perspective of professional data analysis, although the foreign trade data at the beginning of the year is easily affected by the long Spring Festival holiday and is not sufficient to explain the trend throughout the year, my country’s overall exports of textiles and clothing will continue to be under pressure this year. This trend is generally recognized by industry insiders .
Relatively limited market capacity, small order quantity, and lack of market channels are common problems encountered by companies expanding into emerging markets. However, reporters recently learned in interviews that in emerging markets such as Africa and South America, the primary problem faced by my country’s textile and apparel export companies recently is not orders, but the difficulty in collecting payments caused by the depreciation of the currency of the export destination country. The risk of foreign exchange collection will become the biggest risk faced by enterprises in exporting.
Zhejiang Textile Import and Export Group Co., Ltd. is a well-established domestic textile foreign trade export enterprise. The company’s business leader told a reporter from China Textile News, “We are not lacking orders. Exchange rate instability is the biggest ‘killer’ we face.” He said that last year, driven by the recovery of demand in the U.S. market, the company’s focus on the U.S. market The business growth is relatively stable. Although the demand in the European market has shrunk, it has gradually entered a stable stage. The biggest problem encountered by the overall export business is the sharp fluctuations in exchange rates in emerging markets.
According to the analysis of the person in charge, the depreciation of the RMB against the US dollar last year has improved the competitiveness of my country’s products in traditional export markets such as the United States and Europe, and has played a certain role in promoting order acceptance. However, for emerging markets such as South America and Africa, the local currency depreciation is very serious, which brings serious risks and uncertainties to export companies’ foreign exchange collection.
“Since the first half of last year, the price of international commodities represented by crude oil has fallen, causing serious depreciation of the currencies of some countries with a mainly energy export structure. Russia, Argentina, South Africa and other countries have all experienced depreciation, and the currencies of some countries have depreciated. The currency has depreciated by 100%, or even 200% to 300% in severe cases. To take an extreme example, it is very difficult for our company to collect payment for export orders in Nigeria, Africa. After the goods are exported, importers in these countries cannot get them back. We pay in U.S. dollars in foreign exchange, but we have no choice but to rely on barter trade and import some wood and other raw materials to keep the book balance,” the person in charge said.
It is understood that about 30% of the export business of Zhejiang Textile Import and Export Group Co., Ltd. last year was in emerging markets. As an “old foreign trade” enterprise, the company has strong international market expansion capabilities and has built its own business in Africa. It has overseas warehouses and has its own offices in South America. It can be said that it has strong capabilities in developing emerging markets and has invested long-term energy in cultivating them. At present, due to the depreciation of the exchange rate, many small and medium-sized enterprises can only plan to give up their expansion into emerging markets such as South America and Africa, and focus on exports to relatively stable Southeast Asian markets such as India, Vietnam, and Thailand. However, Zhejiang Textile Import and Export Group still hopes to stick to the African and South American markets, because after all, it has invested a lot, and the established foreign trade companies also have strong advantages. “If the exchange rate trend can remain stable in 2016, we can still strive to maintain stable development as the market gradually stabilizes. But in the past one or two years, this market is likely to remain in a relatively difficult situation. This mainly depends on the future There is room for appreciation of the U.S. dollar and the price trend of international commodities,” the person in charge said. “Lao Foreign Trade” reminds peers: Exports must be wary of exchange rate risks
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