(Yicai Global) Nov. 24 -- Business is bad for China’s small and mid-sized exporters as they suffer the double whammy of a surging Chinese yuan and weak overseas demand as the Covid-19 pandemic takes its toll.

The yuan reached 6.5822 to the US dollar today, a gain of over 8 percent from a low of 7.1765 six months ago. The soaring exchange rate has swallowed up the profits of low-margin exporters with limited bargaining power, and in many cases led to huge losses.

Payments for exports are generally made one month to 45 days after the delivery of an order, Meng Zhuo, the manager of Anhui Garments Import and Export, told Yicai Global. The strong yuan lost the company CNY0.20 (3 US cents) per dollar on orders, amounting to CNY30 million (USD4.6 million) during the firm’s peak season from July to October, he said.

An exchange rate can be locked in for some orders, but that is still not enough to cover the rising costs of raw materials and transportation, Meng added.

Shipping rates have soared over the past month because of an acute shortage of cargo containers and shipping space. Containers are stuck overseas because of a lack of goods to fill them before they are returned to China.

Many orders for Christmas gifts have also been cancelled this year as European countries downscale their celebrations, said Xiao Xiao, marketing director at Shanghai Happyfills Crafts and Gifts. Some exporters have seen orders shrink by two thirds compared with the festive season in previous years, he added.

A number of clients are also diverting their orders to Southeast Asia, even after negotiating substantial discounts with Chinese factories, due to production capacity, China-US trade frictions and other factors, Xiao said.

Editor: Kim Taylor