Shanghai, Wenjing Road, Minhang District, Shanghai Flying Horse Knitting Co., Ltd. in front of a sign erected in the significant recruitment of head office, “recruiting skilled knitting, sewing, Tenders, Ran Yi workers”, from time to time there are a number of foreign workers who stop scan.

Many of them were from the Pearl River Delta. Some garment factories in the Pearl River Delta shut down, many workers have chosen the Yangtze River Delta north to find new jobs. “Our labor shortage problems have been alleviated, can even merit.” Garment enterprises in Suzhou, a person who deeply share.

But only solve the “recruitment difficulties” is not enough. Appreciation of the renminbi, raw material prices, labor costs, are the textile, clothing and related heads of the most important export enterprises of the three big mountains, let them breathe.

“In 2008, the textile exports of the industry’s most difficult year.” Shanghai Flying Horse Import & Export Trading Co., Ltd. (hereinafter referred to as Pegasus Shanghai, Shanghai Flying Horse Knitting Co., Ltd. for its self factory), General Manager Lu Longsheng commented on this year’s exports situation. He admitted: “We’re doing foreign trade business, profit margins may be only about 1%, only about 3% of the factory. Some of our factories have even at the loss of self-edge.”

Shanghai Flying Horse is the most famous of the local textile exporting companies. Pegasus textile exports through Shanghai, mainly purchased from outside the factory, a small amount from its own. In 2005, Shanghai Pegasus export 192 million U.S. dollars, 221 million U.S. dollars in 2006, 2007, compared to 2.4 billion U.S. dollars.

“Shanghai Pegasus can be said that textile and garment export-oriented enterprises in the representation business. Its export value, export volume and export price changes, reflected the typical situation of this industry.” Forward Wang, general manager of the first textile network said.

This is a typical textile and garment export business.

Shanghai Flying Horse of every order to go through the following steps: negotiating with foreign clients, both sides agreed the price, delivery conditions, the order to the Shanghai Pegasus in the suburbs of Shanghai garment factory or a delegate to the long-term cooperation in Jiangsu and Zhejiang outside the factory, garment factory in Jiangsu, Zhejiang and other areas from procurement of material, to mass production, and finally, export deliveries to foreign customers.

Jun (not his real name) is a Shanghai Pegasus salesman, usually, her main job is to contact with foreign customers, to find clothing factory orders and so on. “Difficult this year than in the past, due to various unfavorable factors are at work.” In her view, every step of the hidden “trap.”

Bear the brunt of the appreciation of the renminbi.

“Appreciation of the yuan against the dollar too fast.” Lu Longsheng said. Originally, Shanghai Pegasus has been under 3 months of possible changes in the RMB exchange rate quotations, orders, but after 2008, this advance has not catch up to judge the speed of the appreciation of the RMB. “Early this year, we estimate the second quarter, the RMB exchange rate against the U.S. dollar could break 7, but now the first quarter, saw this node would burst, than our 3 months ahead of schedule.”

March 28, the U.S. dollar against the yuan’s exchange rate of 7.0137, only one step away from the 7. In 2007, the RMB appreciation rate of 7% in 2008, significantly faster appreciation of the renminbi, has appreciated only a quarter of 3.9%.

Exchange rate changes to include China, including Shanghai Pegasus textile and garment export enterprises great variable. If billions of dollars in exports each year calculated in accordance with the enterprise because of losses caused by the yuan appreciation may reach 10 million.

A fabric factory in Wujiang, Zhejiang business manager, told reporters that exchange rate changes on export business of textile fabric not because of its short lead time, about a month, the exchange rate easier to determine; but Pegasus such as Shanghai garment export company, because the delivery period is longer, by the greater impact of exchange rate changes.

Lu Longsheng admitted, “Now, we only do 3 months of basic orders, not take orders for the long term.”

RMB exchange rate together with up Haifei Ma “pressure” is “raw cotton, cotton yarn, fabrics, processing” the whole industry chain layers of conduction from the cost pressures.

Shanghai Hong Crown Knitting Co., Ltd.head on Meizhen told reporters that in 2007, up 2,000 yuan per ton of raw cotton, cotton yarn prices leads; staining burning coal and other steps need to use the big oven, and coal prices from the past 200-300 yuan / ton, has risen to today’s more than 800 yuan / ton.

Rising oil prices also conducted to textile and garment export industry. The main component of chemical fiber fabrics in PTA (8128, -40.00, -0.49%, right), is refined from crude oil from, the foreign company’s transportation costs are also directly related to oil prices.

The implementation of the new labor law is more extensive, the whole industry chain labor costs are rising. “Foreign few employees, subject to little influence on labor costs; but we are garment factories are labor-intensive enterprises, the impact on the big.” Lu Longsheng said garment factory in Shanghai, Pegasus, the wages of workers average increase of 10% per person per month increased by about 100 yuan.

While the rising costs is Revenue – “export tax rebate,” the lower.

Since 2003, China has three times lower textile and garment export tax rebate. Last adjusted in July 2007, which, clothing, shoes, hats, bags and transferred to 11% from 13%, viscose fiber to 5% from 11%. Pegasus in Shanghai for the decline in tax rebates, directly reflects the decrease in operating profit.

If the cost pressures can be transferred to downstream customers, then traders and manufacturers may be able to alleviate some pressure, but that is not the case.

Wang, general manager of the first textile network forward told reporters, because textile and apparel industry is in “excess capacity, excess supply” situation, therefore, foreign customers often have a strong “voice,” lead to “cost pressures can not be normal to pass under. ”

Lu Longsheng said, “Due to rising costs, we can only raise prices, but some foreign customers do not want to accept the price increase, we can only give up this list; of course, even if the customer acceptance of price increases, sometimes, prices and also not fully cover costs, for example, (due to rising costs) to reduce our profit of 20% -30%, but we may have only 10% of the price increase. ”

In factories, traders, foreign customers, “cost” game, the factory is undoubtedly the most vulnerable position.

Lu Longsheng admits, “such as Shanghai Flying Horse traders still some space”, but “there is little room for the factory.” “Do not look at the plant margin (3%) than we do foreign trade (1%) slightly higher, but because of the factory population, Tan Dao’s profits each person a little.” Because the inability to cope with a variety of adverse factors “Recently, many factories have been turned off. our profit and self-plant big drop compared to last year, has nearly lost.”

At present, Shanghai Pegasus self and agency business of the ratio of 2:8, “We’ve got some list of Jiangsu, Zhejiang to do most of the agent has. Do self? How can so much money.” In Lu Longsheng It appears that self-factory labor costs are too high, the textile and garment export business the most headaches.

When in 2006 the export tax rebate cut, Lu Longsheng said, “a great impact the export tax rebate cut, Shanghai Pegasus exports have 620 kinds of product categories, ranking first in the country affected, and more.” Year, the Shanghai Pegasus profits fall 20 % or so. Down again in 2007 when the export tax rebate, Lu Longsheng said that Shanghai Pegasus exports did not decline, but once again lower profits.

Or 2007, the RMB appreciation effect previews. In an interview, Lu Longsheng claims: the initial exchange rate reform, “Shanghai Pegasus choke a few saliva, paid a price, but the good news in a timely manner to adjust the business strategy, sales staff required for each export contracts signed with foreign investors, it will the next few months the exchange rate risk into account, that is playing the ‘advanced content’.

But in 2008 the situation more severe. If the negative factors in the past, the “man operation”, this year is hit with multiple pressures.

Accelerated appreciation of Renminbi against the U.S. dollar, “the amount in advance” does not work; rumors, the future, textile and garment export tax rebate rate will be lower and lower by 2 percentage points; new labor law introduced this year; raw materials, energy prices remain high; United States sub-prime crisis. 1,2 months in 2008, Shanghai Pegasus significantly reduced orders from the United States, down 34%.

Of course, not all changes are negative. Lu Longsheng said that while orders from the United States declined, but EU orders are increasing, 1,2 months of 2008 increased by about 50%, and “a better price on.”

This is because, in appreciation of the yuan against the dollar while the euro was depreciating the other hand, benefited from the EU lifted quota restrictions on Chinese textiles.

The face of pressure, Lu Longsheng said that in 2008, Shanghai Pegasus hopes to stabilize the one hand, customers first, on the other hand is still “developing new products, new materials, improve value-added products, to obtain a higher profit margin.” He also admits, “It’s very difficult from the start, would not be very obvious.”

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Category: Business Management
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