Small And Medium Traders And The "Exchange Rate Race"

Tens of thousands of small and medium traders in China are now learning to compete with the renminbi appreciation rate of appreciation.

Breaking "7" - this is a day that many small and medium traders who specialize in export orders have long anticipated.

Therefore, before the day came, they had already started to talk about price everyday.

Whether it is a short period to offset exchange rate risk or eventually forced to raise the price, now, when the RMB exchange rate breaking "7" finally arrived, one of the pillars of China's economic growth, exports, is learning to survive in a gradually changing new ecosystem. Small and medium traders obviously are reluctant to see the story of boiled frog in their own way.

The shortening period of the yuan appreciated by 7% against the US dollar in 2007, while it appreciated by 4% in the first quarter of 2008.

Under such a pformation, Zhang Sheng, who specializes in footwear export trade, is inclined to do "short, flat and fast" business.

"If it's a long term bill, I will stipulate how much money the customer adds every month."

Zhang Sheng believes that this may keep pace with the appreciation of the renminbi.

Zhao Jing, who is doing the textile business, shares the same feeling with Zhang Sheng.

She has been working in this industry for more than ten years, so she has accumulated many fixed customers. But now, these customers have become the most difficult part of her. Because of the exchange rate reason, she has to consider filtering out some customers, especially those who have a long time to pay and pay less.

Everything is due to the rapid rise of the RMB against the US dollar.

"I can predict the exchange rate movements for one or two months, but over three months, if the exchange rate of RMB against the US dollar is low, the price of commodities will be higher, which will make it difficult for the clients to accept. If the forecast is high, I may lose money."

Wang Xiaochuan made the trade of daily chemicals, the production cycle was short, and the sensitivity to the exchange rate was slightly weaker, but in the case of accelerated exchange rate changes, he had to change some ways of collecting money.

The letter of credit that can play a role in marking the exchange rate has become an effective tool for Wang Xiaochuan to avoid exchange rate risk.

"We ask our clients to pay euros, but most customers know that the US dollar settlement is more cost-effective for them, because the US dollar is also depreciating against the euro.

We didn't use the letter of credit before, and now we can accept the letter of credit, so that we can fix the exchange rate. In addition, we ask the client to pay more in advance, which can also reduce the exchange rate loss at the time of settlement. "

At the beginning of the year, when the price was discussed, Xiao Chuan set a price of 6.9 for the daily chemical products of a month.

"And offer valid within 30 days.

So every day we talk about the exhaustion of price.

Wang Xiaochuan said.

Turning to Europe now, orders for Europe seem to be more comfortable than American orders. Traders in Wang Xiaochuan seem to believe that although European orders are relatively fragmented, the size of the US orders is not concentrated, but the risk is relatively small.

"The US order may be larger, but the risk is also great. In the face of the policy and economic changes of the two countries, a $2 million bill may not have been available this year.

And importers in the United States are more expensive.

Zhang Sheng said, "Europe is small and medium-sized orders, but the risk is relatively dispersed. There is rain in the East, the west is clear, the orders are fragmented, but there will always be business to do, and the price of the order customers will be better."

However, the relaxed environment is only relative to the US trade.

Because Zhao Jing's knitted sweater, Zhang Sheng's shoes and Wang Xiaochuan's daily necessities are mostly exported to Europe, but importers are still reluctant to use euros, but insist on using US dollar settlement.

This has nothing to do with the depreciation of the US dollar against the euro.

Ma Jun, a greater China economist in Deutsche Bank, predicted that the renminbi would soon be 7 to 1 against the US dollar in mid January. But he stressed: "the uncertainty of the exchange rate between the RMB and the US dollar depends on the exchange rate of the US dollar against the euro. If the US dollar is depreciated against the euro, it will depreciate a lot and the rate of appreciation of the RMB will be faster."

Unfortunately for small and medium traders, the reality of the first quarter is what he said.

Because of this, Wang Xiaochuan started doing some domestic trade at the same time in the second half of last year. He said: "besides the RMB appreciation factor, the two reduction of export tax rebates last year and the substantial increase in raw material prices and personnel costs caused by inflation factors have made the price of export business getting worse and worse."

Obviously, foreign trade is not as good as domestic trade.

The price increase is 20% "generally raise 20%."

Speaking of this, Zhao Jing seemed somewhat helpless, because in the face of the fluctuation of the exchange rate, the price increase was only one way to deal with it passively.

The reporter learned that textile products from proofing, quotation to order, and then to purchase raw materials, orders to manufacturers, the cycle is longer, it takes 2-3 months.

Zhao Jing has realized from last year that the appreciation of the renminbi is getting faster and faster. According to the industry practice, she has to estimate the exchange rate, so she set the order rate for May this year to 6.8: 1 and June to 6.7: 1, and then push back the price.

"It is difficult to adjust the price and convince the customers, but there is no way to change the exchange rate, the speed of the change and the bottom. This is the most troublesome thing for me at the moment."

Zhao Jing, who has been trading for more than ten years, has never been troubled by exchange rate as it is now.

Traders are having a bad time, and the links of producers are not much better.

Zhang is not only a shoe export business, but also a producer. He is more sensitive to price changes in commodities.

Because in the "exchange rate impermanence" at the same time, shoe related upstream raw materials - oil, cotton, rubber, steel and so on, have increased substantially since last year.

Now, he is watching: if the renminbi appreciated by 4% in the first quarter, it will reach 16% in the whole year, and it is estimated that the export tax rebates for textiles (including footwear) will be lower again by the end of August this year.

If so, the export quotas for his shoes are at least 20% higher than the same period.