October 18, 2019

Domestic worries continue to squeeze the survival space of China's manufacturing industries such as textile and clothing homes

If the external demand is weak, the domestic market will naturally come to mind. But can foreign trade companies be smooth in the domestic market? The reality does not seem to be optimistic. Economic downturns, inflation, rising costs, difficulties in recruiting workers... Fought in the domestic market, “Made in China” is still plagued by many factors. He wants to hedge domestic demand against external demand, and foreign trade companies still have a long way to go.

Huo Jianguo: Expensive cost reductions in manufacturing competitiveness The changes in the market share of the three major trading partners of the EU, the United States, and Japan have a direct impact on the overall trend of China’s foreign trade. Recently, China’s market share in Europe, the United States, and Japan is decreasing.

The data shows that since 2011, the proportion of China’s export products in the US, EU, and Japan has fallen by 1.3, 1 and 0.6 percentage points respectively, and the largest declines are in textiles, clothing, footwear, bags, furniture, toys and plastic products. There are 7 categories of labor-intensive export products. Among them, the market share of textiles and garments in Europe and the United States fell by 1.1%, furniture by 1.7%, toys by 2.0%, and bags by 2.6%. At the same time, the market share of other emerging market countries in Europe and the United States has increased. For example, India's share of the US textile market rose from 19% to 20%.

The culprit behind this phenomenon is the recent rising domestic factor costs, especially labor costs. In the past three years, the wage cost of labor in the country has risen sharply, and the minimum wage rate has been continuously raised, which has caused China’s labor-intensive products to face competition from traditional exporting countries and developing countries. The data shows that the labor cost in Bangladesh is 0.22 U.S. dollars per hour, Cambodia 0.33 dollars per hour, Vietnam 0.38 dollars per hour, India 0.51 dollars per hour, and China is 1.08 dollars per hour. The increase in labor costs has already affected the competitiveness of our export products.

China's electromechanical products are also plagued by rising costs. The steady growth of trade in electromechanical products is an important indicator of the optimization of China’s export commodity structure. However, since 2011, the export growth rate of electromechanical products in China has declined somewhat, and the proportion of total exports to China has continued to decrease. In 2011, China's export of mechanical and electrical products was US$108.55 billion, an increase of 16.3%, which was lower than the total export growth by 4 percentage points, which was lower than the growth rate of export of primary products, agricultural products and industrial products by 6.8, 6.7, and 3.9 percentage points respectively. Among them, the export growth rate of high-tech products was 11.5%, which was lower than the overall increase of 8.8 percentage points. The share of mechanical and electrical products in China’s exports dropped from 59.2% in 2010 to 57.2% in 2011, a decrease of 2%. At the same time, the growth rate of textile and apparel exports was higher than that of mechanical and electrical products, which was an increase of 20.6%, which was 4.3% higher than that of mechanical and electrical products.

The decline in the proportion of export of electromechanical products is mainly affected by two factors. On the one hand, the economic growth in Europe and the United States is sluggish. The slow development of investment products leads to sluggish demand; on the other hand, there is a greater pressure on rising raw materials and costs. According to a survey conducted by the China Chamber of Commerce for Import and Export of Machinery and Electronic Products, since the end of 2010, the production cost of electromechanical companies has generally risen by 10% to 20%, and the overall level of export profits of electromechanical products has been low. The average profit margin is only 3% to 5%. The situation shows that the international competitiveness of China's mechanical and electrical products is weakening. The decline in the export growth rate of electromechanical products is in violation of the promotion and transformation and upgrading of foreign trade, which is not conducive to the upgrading of China's export product structure to the mid-to-high end of the manufacturing industry.

Zhai Changhong: It is not realistic to rely on luxury goods to stimulate domestic demand. This year's "Government Work Report" mentioned that with regard to foreign trade, it is necessary to achieve stable growth. Second, we must actively expand imports. So how can China expand imports? Some people have suggested that the excessively high tariffs on Chinese luxury goods have led to the loss of domestic purchasing power overseas, and proposed reducing the import tariffs on luxury goods, pulling back overseas purchasing power, and thus achieving the goal of expanding imports.

I personally think that this proposal is not feasible. In 2011, China’s imports of consumer goods were approximately US$120 billion. Among them, the scale of luxury goods imports is about 17 billion to 18 billion US dollars, accounting for 15%. Although the demand for luxury goods will continue to grow in the future, it is still unrealistic to rely on them to drive the domestic market of several hundred billion yuan and even trillions of yuan in the domestic market.

To take a step back, even if it is necessary to return to overseas luxury goods to boost the domestic demand market, the effect of reducing tariffs is limited. There are many reasons consumers choose to spend on luxury goods overseas. In addition to price factors, 69% of people choose overseas consumption because overseas goods are rich in style, and 45% of consumers use overseas purchase as an enjoyment, that is, they can Really enjoy the origin of products and local services, and these can not be satisfied by reducing tariffs.

Yao Jingyuan: The new problems of the troika affect the activation of domestic demand At present, the most prominent problem in China's economy is the economic downturn and the “double price coexistence” of rising prices. From the fourth quarter of 2010 to the fourth quarter of 2011, China's national economic growth rate was 9.8%, 9.7%, 9.5%, 9.1%, and 8.9%, respectively, which fell for five consecutive quarters. With the disbursement method breakdown, investment, consumption, and export, the three carriages that drive economic growth, have also encountered new conditions and new problems recently.

Look at the export first. In January 2011, China's export growth rate was 37.7%. By the end of December of that year, the export growth rate had dropped to 13.2%. In January and February this year, the export growth rate was only 6.9%.

Look at investment again. Investment can be divided into three types, namely, infrastructure investment, enterprise renovation, expansion of reinvestment, and real estate investment. Among them, infrastructure investment was stimulated by 4 trillion yuan in capital injection during the financial crisis, and it was 20% to 60% growth at a time. However, as the stimulus of capital has gradually dissipated, the growth in infrastructure investment has been decelerating to January and February of this year. There was a negative growth of -5.4%. The investment in corporate renovation and transformation was generally good. However, as domestic enterprises did not have a strong incentive to transform and innovate, investment in January and February of this year also fell. As for real estate investment, due to investment and speculative funds. The investment has caused a serious mismatch between property resources and demand. The fall in investment growth has also directly contributed to the economic downturn.

The last is consumption. It is currently at the most important stage of development in China's consumer structure upgrade. National consumption is gradually shifting from food and clothing consumption to housing and transportation. However, because of the recent high prices, it is difficult for residents to consume, and residents do not consume. The domestic market is difficult to activate.

Zhu Hongjie: The five problems plaguing the pressure of foreign trade development In the face of China’s foreign trade, not only is there a lack of external demand, there are still many internal challenges. There are five major issues.

First, the exchange rate risk still exists. Since the exchange rate reform, the *** has risen by 30% against the U.S. dollar. If inflation is taken into consideration, the appreciation rate will be higher. It is expected that the *** will continue to appreciate against the US dollar for some time to come. In stark contrast to this, the currencies of India, Russia, and Brazil in the BRICS countries are depreciating against the US dollar. This will seriously weaken the price advantage of Chinese commodities and increase China’s foreign exchange rate risk.

Second, the problem of “comfortable” companies is being solved slowly. Macro-control policies have increased the difficulty of enterprises, especially the financial pressures faced by small and medium-sized foreign trade companies. Commercial banks reluctantly loan because of the lack of guarantees and collateral for small and medium-sized enterprises, or the problems of SMEs. Even with ** support, the rate of interest rises to a greater extent, and the interest rate of small-loan companies is even higher, which can be up to 4 times the benchmark interest rate. This, together with various costs in the process, increases the company's costs.

Third, the factor cost has risen significantly and traditional advantages have encountered challenges. In recent years, the wage increase of corporate workers has averaged about 10% to 12%. In 2010 and 2011, dozens of provinces/municipalities raised their minimum wages by an average of over 20%. In particular, the new generation of migrant workers have higher requirements for salary and living conditions, and the increase in short-term migration rate has adversely affected the employment of enterprises. Relatively speaking, the minimum wage rates in Vietnam and Cambodia are about one half and one third of China respectively. The neighboring Southeast Asian countries have even greater advantages in demographic dividends and labor costs. Products exported to Europe and the United States can enjoy more favorable tariffs, attracting more and more international manufacturers to shift their production bases and orders to these countries.

Fourth, the export risk compensation mechanism is not perfect. The current situation in China is that more than 90% of foreign trade companies are SMEs, and their risk-taking ability is weak. However, the coverage of export credit insurance for foreign trade companies is only 10%. Many small and medium-sized enterprises are afraid to accept orders due to their inability to take risks, or they are afraid to accept long-term orders and large orders. Since the second half of 2011, the trend of short-term orders has become apparent. In October 2011, in the Canton Fair transaction orders, short orders within 3 months were more than half, orders from 3 to 6 months accounted for about one-third, and orders over 6 months were only about 10%.

Fifth, the international division of labor in the manufacturing industry is at a disadvantage, with low added value.

Li Jian: The emphasis on the factors conducive to stability in foreign trade refers to the impact of the domestic environment on China’s foreign trade. Challenges do exist, but the favorable factors for stabilization are also increasing.

The challenges mainly come from five aspects: First, in the medium and long term, imports are still rigid demands in the future, and it is difficult to suppress the high import prices to bring huge pressure on foreign trade companies; second, the appreciation and fluctuations in the internationalization process of ***; It is a problem of the labor force. Fourth, the increase in productivity of traditional industries cannot keep pace with rising costs. Fifth, the import and export management system still cannot adapt to changes in the new situation.

The favorable factors come from two aspects: First, domestic inflation is slowing down. In the first two months of this year, China's inflation rate has fallen to 3.9%, and it is more likely to be controlled at around 4% in 2012. At the same time, the exchange rate of the *** has also tended to balance with trade. Although the *** has appreciated in the long term, the pressure for recent appreciation has actually eased. In the near future, whether it is the middle price of the *** or the offshore long-term exchange rate, the exchange rate has risen and decreased. The three-month *** forward exchange rate showed a flat or declining trend. In addition, according to data released by the International Maritime Organization in February, the export order index is also improving. It is believed that with the further fine-tuning of macroeconomic regulation and monetary policy, the money supply will shrink in the near future, and foreign trade policy will remain stable.

Second, the goal of a 7.5% increase in gross domestic product (GDP) has new significance for the development of foreign trade. The goal of lowering economic growth is undoubtedly a major plus for foreign trade development. Because lowering the economic growth target will help curb domestic investment overheating and curb inflation, so that foreign trade growth will not be subjected to excessive cost pressures; it will also help alleviate the supply and demand of labor resources, supply and demand of labor for many years. The tightness of the money supply; it also helps to create the environment for foreign trade transfer, structural adjustment and balance promotion.

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