Chinese Foreign Trade Firms See Recovery of Orders But Fall in Net Profit(Yicai) Oct. 23 -- The number of orders Chinese foreign trade firms have received this year rose, but their net profits have not returned to the level in the past years, as China's foreign trade remains under pressure because of the complex external environment and challenges in the domestic market.
This is the high season for foreign trade, as many exhibitions and trade fairs are being held. Besides the ongoing 134th Canton Fair, also international fairs for gifts, toys, electronics, and other products kicked off in China's Hong Kong, Shenzhen, and Yiwu. Many overseas clients and general visitors attended these fairs.
The total value of China's imports and exports fell 0.8 percent and 0.6 percent, respectively, in September from a year earlier, according to data from the GAC. However, the figures rose 2.7 percent and 5.5 percent last month from August, up for the second consecutive month.
Orders grew about 15 percent in the third quarter from the same period last year, Ding Yandong, general manager of Rollmax Shutter Component, told Yicai. With the coming high season for foreign trade, "we have been working overtime, even on weekends, to fulfill the orders," Ding noted.
About 100 clients, of which one-third were from European countries and the United States, made appointments to negotiate with us at the Canton Fair, said Zhu Xiaomei, vice president for overseas marketing at Guangdong Xinbao Electrical Appliances Holdings. The leading Chinese small household appliance exporter has never received so many clients during a Canton Fair.
Firstop Outdoor Leisure Products will likely see a 20 percent increase in export orders this year from the previous one after experiencing a big decline last year, said founder Le Tianen. Firstop Outdoor has received the attention of more clients from emerging markets after having targeted the European and American markets.
A Brazilian client told Le that demand for Firstop Outdoor's products, especially water sports equipment and massage bathtubs, is increasing quickly in Brazil despite per capita consumption in the country being lower than that in Europe and the US.
Although the number of orders has increased significantly, low selling prices and challenges in the international environment have been affecting Chinese foreign trade companies.
Firstop Outdoor's net profit ratio is about 3 percent now, versus an average of around 10 percent among foreign trade firms in the past, Le noted. For the water sports equipment industry, the net profit ratio is 5 percent now, which is half the average in the past. According to Le, a 3.2-meter-long paddle board was priced at over USD120 a decade ago, but now it costs just over USD70.
Falling sales prices are related to the decline in raw material prices. But inflation, regional conflicts, and the energy crisis are bigger factors to consider, together with the weakened overseas markets' consumption ability. Moreover, competition among Chinese foreign trade firms has intensified because of the downward economic trend.
The unstable recovery trend of the global economy remains the biggest challenge for Chinese exporters, despite their comprehensive competitive edge remaining solid, Lv Daliang, head of the General Administration of Customs' Department of Statistics and Analysis, said on Oct. 13. But overall, the stabilizing trend of Chinese foreign trade firms is expected to solidify this quarter.
In September, some firms said their export orders remained stable, with their growth increasing 0.8 percentage point from August, according to a survey carried out by the GAC. Moreover, the ratio of foreign trade companies optimistic about the future rose 1.3 percentage point.
Editors: Liao Shumin, Futura Costaglione
