This year, China’s foreign trade is facing multiple pressures such as the epidemic, the Russian-Ukrainian war, the outbreak of inflation, rising shipping prices and exchange rate fluctuations. Many domestic foreign trade companies are facing a significant reduction in foreign trade orders, old customers do not place orders, and there is a lack of new customers.
Since the outbreak of the epidemic three years ago, although my country’s foreign trade has experienced many shocks, the situation this year is different from previous years. The downward trend of foreign trade is very obvious. This is in stark contrast to the steady growth of foreign trade data from January to February. Judging from the overall situation of foreign trade, the decline in overseas demand this year is basically a foregone conclusion.
So, what has led to the sharp drop in overseas demand this year? The author believes that the sharp decrease in foreign trade orders is mainly due to the following factors:
1. Global economic downturn
Under the continuous impact of the epidemic, the economies of all countries in the world are generally facing downward pressure. Inflation has broken out in Europe and the United States. In the case of weak consumption and reduced demand, import buyers have to reduce orders for non-daily necessities.
2. The impact of the Russian-Ukrainian conflict
Since the outbreak of the Russian-Ukrainian war, freight rates have remained high, and at the same time, commodity prices have skyrocketed, pushing up domestic inflation and causing pressure to increase input costs.
Affected by the conflict between Russia and Ukraine, energy prices have skyrocketed, and the global supply chain is still in a state of tension. Ocean freight rates in Europe and the United States have remained high, and the prices of some raw materials have remained high. The risk of war has further pushed up the market risk and freight rate of European routes. It also prompted the continuous surge in commodity prices, which further increased the production and transportation costs of foreign trade companies, and corporate profits were squeezed by many parties.
Take the shipping price as an example, the same freight price has risen from $3,000 in the past to more than $10,000 now. The high shipping costs have offset most of the profits, coupled with the continuous rise in the price of raw materials, the business that used to make money is now going to lose money.
In addition, with the escalating financial sanctions imposed on Russia by Western countries, the foreign exchange market has become more volatile, increasing the exchange rate risk of foreign trade companies.
3. Competition from Southeast Asian countries
Affected by a new round of Omicron epidemic this year, the epidemic in my country has repeated, and many factories have stopped and reduced production one after another. After the epidemic in Southeast Asian countries eased, domestic production recovered quickly, and compared with my country, it also had the advantage of low labor costs. In this case, a large number of foreign trade orders flowed to Vietnam and other Southeast Asian countries around my country. In fact, although China is still the factory of the world, but it is no longer the only option for foreign businessmen.
4. Declining consumer demand
In the current situation of global inflation, the spending power of consumers around the world has also continued to decline. The epidemic superimposed on inflation, prices, oil prices and other consumer goods prices continued to rise, causing European and American consumers to start to change their consumption concepts and consume more cautiously. Now, in addition to just-needed supplies, they will not buy other non-rigidly-needed supplies that they can’t buy, and they are no longer as generous as before.
So, facing many unfavorable factors, what measures should foreign trade enterprises take in order to overcome difficulties, adapt to market changes and win development opportunities? In this regard, the author believes that foreign trade enterprises can adopt the following coping strategies:
1. Actively respond to market changes and switch trade objects
Under the background that the European and American markets are generally in a sluggish state due to inflation, Chinese foreign trade companies should take the initiative to switch their trade targets, from the traditional European and American markets to RCEP members and countries along the “Belt and Road”.
RCEP is the world’s largest free trade agreement, covering 2/3 of the world’s GDP and 47% of the population. The GDP of the 15 member countries accounts for 29.3% of the global economic aggregate, and the intra-regional trade volume is 10.4 trillion US dollars, accounting for 27.4% of the total global trade volume.
In this trading system, more than 90% of goods traded will eventually achieve zero tariffs. It can be seen that the RECP agreement contains huge market potential and broad development prospects. Therefore, Chinese foreign trade enterprises should seize this opportunity, take the partner countries of the agreement as new trade targets, and use this as a force for foreign trade to open up new markets.
In fact, ASEAN has replaced the EU as China’s largest trading partner since 2020. Since the outbreak of the epidemic, the friendly and cooperative relations between China and ASEAN countries have not stagnated, but have shown a development trend of contrarian growth.
Data show that in the first quarter of this year, the bilateral trade volume between China and ASEAN accounted for nearly 50% of the trade volume between China and RCEP member countries. China mainly imported agricultural products from Southeast Asian countries, while ASEAN countries imported various goods made in China.
In addition, according to data provided by Grande’s official website, from January to February this year, my country’s total import and export of countries along the “Belt and Road” reached 1.92 trillion yuan, an increase of 18.3%. Last year, my country’s trade volume with countries along the “Belt and Road” route has reached $1.8 trillion. Foreign trade enterprises can take this opportunity to further expand the foreign trade market and carry out trade cooperation with ASEAN countries and countries along the “Belt and Road”.
2. Make full use of new-generation technologies such as the Internet and big data to effectively find and tap new customers
In the Internet era, basically all the information of customers can be found online, especially under the trend of normalization of the epidemic, many trade contracts are completed online. Even on April 15 this year, the 131st China Import and Export Fair (Canton Fair) held in my country was forced to open in the cloud.
Chinese and foreign merchants from more than 200 countries and regions around the world attended the conference on the cloud to develop business and conduct trade cooperation and exchanges. In order to avoid the impact of large-scale events on epidemic prevention and to ensure the health of exhibitors, this Canton Fair has chosen to be held online.
In fact, by using Internet search engines and third-party platforms of various industries and enterprises, you can smoothly obtain all aspects of customer information you want to know. Using the data analysis provided by big data, high-quality customer information can be screened out, and the time for manual customer collection and selection can be shortened.
3. Improve the core competitiveness of foreign trade enterprises and create high-quality products. This is the trump card to reverse the unfavorable situation of foreign trade.
“Foreign trade products can gain access to the international market and sell well all over the world” is the common ideal and goal of all foreign trade enterprises. However, to achieve this goal, there is no shortcut other than developing new products through technological innovation. Therefore, the vast number of foreign trade export enterprises must be deeply aware of this.
In fact, under the background of high-quality development of China’s economy, “specialized, refined and innovative” is the future development direction of China’s small and medium-sized enterprises. In recent years, the state has issued a series of support policies to encourage the development of “specialized, refined, and new” enterprises, in order to guide the majority of small and medium-sized enterprises to develop along this correct track.
Because only by taking the road of “specialization, specialization and innovation” can we avoid low-level vicious competition among peers. In the past, some companies did not focus on technological innovation, but were always thinking about how to compete through low-price competition. Take down your opponent. If this unfavorable market environment for enterprise development is not changed, enterprise development will always fall into a vicious circle of involution.
In order to truly win the market in China’s foreign trade, Senling Motorcycle Co., Ltd does not rely on low-level repetitive manufacturing and low-end products, but needs to accelerate the pace of industrial upgrading and use high-end products “created in China” and “invented in China” to fundamentally change What people think about Chinese scooters and motorcycles.
Post time: May-05-2022