A butterfly flapping its wings in the Amazon rainforest of South America could cause a tornado in Texas two weeks later. In the field of trade, when the "butterflies" around the world fluttered their wings at the same time in the first half of the year, the foreign traders who are in the world's largest country in goods trade also felt a different "shock".
Having been in the industry for nearly 20 years, Chen Qian, a trader in the garment industry in Yiwu, has never experienced such an uncertain first half of the year. In the first five months, the company's export cargo volume fell by at least 50% year-on-year. Due to these uncertainties, some overseas company customers choose to tear up the contract at the cost of losing the deposit, even if the deposit has been paid and the goods have been produced.
In the past, when there was a conflict or exchange rate fluctuations in a certain region in the short term, Chen Qian and her peers would take the initiative to adjust the market focus. But this year, she feels that the political conflict in the Middle East, the sharp fluctuations in the exchange rates of many African countries, the turmoil in many South American countries, and the rapid rise in sea freight rates and other factors have caused companies to face a comprehensive contraction in product demand.
In the past month, the OECD, the International Monetary Fund and the World Trade Organization have cited geopolitical tensions, regional conflicts and economic uncertainty as the main risks to global trade when forecasting global trade, and warned that governments should now focus on national security, self-reliance and support for domestic businesses.
Traditional traders facing the European and American markets are also lamenting that the "golden age" of foreign trade has passed. In the first half of this year, Luo Xiaohua, president of Guangdong Mijie Group, which is engaged in the export of high-end sanitary products, ran in Europe, America and Australia, and a small number of customers gave him feedback that "the demand can be the same as last year, which is very good", and most of them have lowered the expected demand for this year.
In the first quarter of this year, Foshan's exports fell by 40.4% year-on-year, of which the exports of furniture and its parts, ceramic products, clothing, lamps and lanterns, lighting fixtures and their parts fell by more than 50% year-on-year; In the first four months, Dongguan's exports fell by 3.7% year-on-year, of which exports in April fell by 8.9% year-on-year.
A lot of uncertainty in emerging markets
Since October last year, in just half a year, Chen Qian has experienced market fluctuations from commodity "bursting orders" to a rapid decline in demand.
In recent months, Chen Qian and her colleagues have often encountered such a situation: when the customer has paid the deposit and the production of the goods is completed, they choose to break the contract due to the soaring freight rate, the extension of the transportation cycle or the sudden change in the market of the country where they are located. The customer loses the deposit, and the trader has to face the dilemma of hoarding goods. At present, Chen Qian's factory has hoarded millions of yuan worth of goods.
With the occurrence of similar incidents many times, including Chen Qian, we have to face some situations where "overseas customers dare not easily place orders, and foreign traders dare not easily accept orders". She said that the order volume in the first two months of this year was barely flat compared with last year, but the order volume fell seriously from March to May, and the upstream manufacturing factory in Foshan also reported that the production capacity situation in recent months was not optimistic.
Because 40% of the company's products rely on exports, Wang Tingting, foreign trade manager of Guangxi Xinguilun Rubber Co., Ltd., also lamented that "I can't understand the market trend this year" - on the one hand, many customers in overseas emerging markets have reported to her that local demand is sluggish, and consumers have no money in their hands, so the market has not been able to achieve the expected recovery; On the other hand, uncertain events such as rising sea freight, anti-dumping and countervailing investigations of tire products in many countries, and rapid fluctuations in exchange rates in some regions have also occurred intensively in half a year.
She said: "In the past, foreign trade could roughly predict the market trend in the past six months, but now various situations may occur in a short period of time, which is difficult to predict." Now it is not the company that actively selects the export market, but has to see which markets can still be exported. ”
Export competition is also intensifying. In the process of exporting high-end tire products, Wang Tingting's company has encountered the situation that some domestic manufacturers continue to reduce prices this year, which eventually leads to a downward spiral in the price of domestic export tire products. In order to cope with this situation, enterprises can only make more use of Guangxi's geographical location to further expand the Southeast Asian market.
Even if demand shrinks, "involution" intensifies, and sea freight rises, the operation of foreign trade companies' production capacity and exports cannot be easily stopped.
Wang Tingting said: "The market is not good in the short term, and it stands to reason that the pace of production should be slowed down. However, the factory has to pay rent, and the factory can not easily give workers holidays, coupled with the pressure of raw material capital inventory, all kinds of pressures are forcing enterprises to ensure a certain production and sales volume. ”
In addition, since the beginning of this year, the rising cost of tire raw materials has also brought new problems to tire manufacturers. Wang Tingting said that in the process of rising costs, it is difficult for companies to cope with productivity growth or technological breakthroughs, so enterprises can only "take one step at a time" and try to maintain friendly relations with old customers.
Clients in Europe and the United States are deeply affected by inflation
In the process of visiting the European, American and Australian markets in the first half of the year, Luo Xiaohua's most intuitive feeling is that ordinary consumers are affected by inflation and their purchasing power has declined significantly, which has led to a much smaller market "cake" compared with last year. In order not to lose the original market share, suppliers are seriously "involuted" in price.
Before 2019, Luo Xiaohua chose to abandon the low-end and take the high-end development route, for which he invested nearly 300 million yuan to build a new bathroom product research and development and production project, and at the same time purchased an electroplating plant to improve the process manufacturing level of bathroom products.
He said: "In recent years, many bathroom product manufacturers in Foshan and Dongguan have chosen to take the high-end route, mainly to stabilize the order volume and choose to cater to the high-quality needs of European and American customers. In contrast, the demand for orders in Southeast Asia and the Middle East is relatively low-quality. ”
From 2022 to 2023, Luo Xiaohua's company has won new orders from many large home improvement and building materials supermarkets in Europe and the United States with its new production capacity, and the factory has almost always been in full production.
But this year, orders have also started to decline. During the visit, Luo Xiaohua learned that because of continuous inflation, the middle class in Europe and the United States has increased a lot in the cost of buying, renting and decorating houses, the budget is tight, and the demand for high-end bathroom products has declined.
Luo Xiaohua said: "At present, it seems that only when inflation is reduced to a certain extent, the demand for high-end bathroom products will gradually rise, but it is not yet clear when such a turning point will come." These factors are not up to us traders, and we can only wait for market demand to restart. ”
Luo Xiaohua is very nostalgic for the "golden age" of foreign trade enterprises five or six years ago. He said that before 2019, there would not have been so many uncertain events, when peers were full of expectations for foreign trade, enterprises dared to invest in expansion of production if they had expectations, and overseas orders basically did not have to worry.
Even though the moment is full of uncertainty, Chen Qian still did not "lie flat". She said: "Although peers are lamenting that the 'golden age' of traditional product trade has passed, foreign traders are still actively seizing all potential opportunities, busy developing new orders when there are no orders, and busy completing orders when there are orders, which is the fate of foreign traders, and can never stop." ”
(At the request of the interviewer, Chen Qian is a pseudonym in the article)