PPE

Higher exchange rate makes Dongguan shoe industry face the dilemma of receiving orders and losing money

the exchange rate of RMB against the US dollar has been rising all the way in recent days, breaking the 6.56 barrier at one stroke, reaching a new high since the foreign exchange reform. The reporter learned from Dongguan, known as the “world factory”, that since the beginning of this year, due to the sharp rise of raw material prices and labor costs, the impact of RMB appreciation on Chinese factories is expanding, and many export enterprises in Dongguan have been forced to raise their prices. However, due to the limited bargaining power, a large number of small and medium-sized enterprises can only support them

Cheng liangbo, general manager of Dongguan Jucheng shoe material factory, calculated an account for the reporter. 1n the past year, the wages of workers in the factory have increased by 20% to 30%, but the price of natural rubber, the raw material, has increased by more than 200%. Therefore, as long as the enterprise receives orders, it will face the dilemma of losing money. At present, the price of products has increased by 15% to barely maintain the operation of the factory. He said that payment for goods usually takes half a year or a year to settle, and the exchange rate at the time of settlement is calculated according to the exchange rate at the time of signing the contract. However, as the exchange rate of RMB against the US dollar has been rising, the already meagre profits of the factory have fallen sharply, or even lost money

Cheng liangbo said that according to the current situation, if the price of export products does not rise, the factory can only wait to close down, but in fact, the bargaining space is limited. Even if the price is raised by 20%, it can only make up for the pressure of rising costs, and the profit margin of the factory is still very low

Li Daxiao, director of Yingda Securities Research 1nstitute, believes that in the near future, the trend of RMB’s continued appreciation has not changed. Therefore, China’s export-oriented enterprises will face the dual pressure of labor shortage and RMB appreciation for a long time

Li Daxiao said that China’s manufacturing industry is facing huge transformation pressure. Low end manufacturing industry without technology content can only be passive in price negotiation. Chinese enterprises need to create their own brands, improve the added value of products, and expand the bargaining power. 1n this process, enterprises that can adapt to the environment and seek innovation and change will stand out, while those that can’t will be eliminated

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