Foreign trade industry under the global epidemic: coexistence of crisis and vitality
From the macro level, the executive meeting of the State Council held on March 24 has made a judgment that “foreign demand orders are shrinking”. From the micro level, many foreign trade manufacturers reflect that due to the rapid changes in the epidemic situation in Europe and the United States, consumer expectations shrink, and brands cancel or shrink the scale of foreign trade orders one after another, making the foreign trade industry that has just returned to work fall into the freezing point again. Most foreign trade enterprises interviewed by Caixin felt helpless: “the European market has completely stopped fire”, “the market is very bad, the world feels paralyzed” and “the overall situation may be more serious than that in 2008″. Huang Wei, vice president of Shanghai Branch of Li & Fung Group, one of the world’s largest garment import and export companies, told reporters that customers cancelled orders from the beginning of March and became more and more intensive in the middle of March, It is expected that more and more orders will be cancelled in the future: “when the brand has no confidence in the development of the next batch, the styles under development will be reduced, and the large orders in production will be delayed or cancelled.
Now we are dealing with such problems every day, and the frequency will be higher and higher.” “We were urged to deliver goods some time ago, but now we are told not to deliver goods,” the head of a jewelry processing factory in Yiwu, which focuses on foreign trade business, also felt the pressure from early March. From last week to this week, 5% of orders have been cancelled, Even if there are no cancelled orders, they are also considering shrinking the scale or delaying the delivery: “it has always been normal before. Since last week, there have been orders from Italy that suddenly said no. there are also orders that originally required to be delivered in April, which required to be delivered two months later and taken again in June.” The impact has become a reality. The question is how to deal with it? Previously, when foreign demand was challenged, it was a common practice to increase the export tax rebate rate. However, since the global financial crisis, China’s export tax rebate rate has been raised for many times, and most products have achieved full tax rebate, so there is little policy space.
Recently, the Ministry of Finance and the State Administration of Taxation announced that the export tax rebate rate will be increased from March 20, 2020, and all export products that have not been fully refunded except “two high and one capital” will be refunded in full. Bai Ming, deputy director and researcher of the international market research department of the Institute of international trade and economic cooperation of the Ministry of Commerce, told Caixin that raising the export tax rebate rate is not enough to solve the export dilemma. The decline in export growth from January to February is due to the interruption of production by domestic enterprises and the difficulty in completing existing orders; Now it is because of the spread of overseas epidemic, Limited Logistics and transportation, the suspension of overseas industrial chain and the sudden stop of demand. “It’s not about price, the most important thing is demand”. Yu Chunhai, vice president and professor of the school of economics of Renmin University of China, told Caixin that despite the sharp decline in foreign demand, basic demand still exists. Some export enterprises with orders are facing logistics difficulties in resuming work and production and entering foreign markets.
The government urgently needs to open up intermediate links such as logistics. The executive meeting of the State Council said that China’s international air cargo capacity should be further improved to ensure the smooth connection of domestic and foreign industrial chains. At the same time, it is necessary to open more international cargo flights and accelerate the development of international logistics express system. Promote smooth international and domestic freight transportation and strive to provide supply chain guarantee for enterprises returning to work and production. However, unlike domestic demand, which can be boosted by domestic policies, exports mainly depend on external demand. Some foreign trade enterprises face cancellation of orders and have no work to recover. Bai Ming said that at present, the most important thing is to help enterprises, especially some competitive and good enterprises, survive and maintain the basic market of foreign trade. If these enterprises close down in a large number in a short time, the cost of China’s re-entry into the international market will be very high when the epidemic situation is alleviated. “The important thing is not to stabilize the growth rate of foreign trade, but to stabilize the basic role and function of foreign trade on China’s economy.” Yu Chunhai stressed that domestic policies cannot change the shrinking trend of foreign demand, and the pursuit of export growth is neither realistic nor necessary.
At present, the most important thing is to keep the supply channel of China’s exports and occupy the export share, which is more important than improving the export growth. “With the rising demand and channels, it is easy to increase the volume.”. He believes that, like other enterprises, what the government needs to do is to prevent these export enterprises from going bankrupt because they have no orders in the short term. Through tax reduction and fee reduction and other policy arrangements, we will help enterprises tide over difficult times until external demand improves. Yu Chunhai reminded that compared with other exporting countries, China’s production is the first to recover and the environment is safer. After the epidemic recovers, Chinese enterprises have the opportunity to seize the international market share. In the future, we can predict and adjust production in time according to the global epidemic trend.
Post time: Dec-16-2021