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Haikou Jiangdong New Area
Economy

China takes steps to stabilize foreign trade

April 15, 2020


Abstract : China will take every effort to stabilize foreign trade and foreign investment amid the COVID-19 pandemic, as China's foreign trade is now facing an unprecedented severe situation, according to Chinese Assistant Minister of Commerce Ren Hongbin.

BEIJING, April 15 (Xinhua) – China will take every effort to stabilize foreign trade and foreign investment amid the COVID-19 pandemic, as China's foreign trade is now facing an unprecedented severe situation, according to Chinese Assistant Minister of Commerce Ren Hongbin.

The negative impact caused by the shutdown of foreign enterprises has been transmitted to Chinese enterprises, according to a research made by Xinhua in Beijing, Guangdong, Jiangsu and Zhejiang recently.

--Foreign trade enterprises facing a sever test

Against the backdrop of the pandemic accelerating its global spread, most of foreign trade enterprises which had been urged to deliver goods in February, face a dilemma that the orders are canceled when they are stepping up the pace to resume production. What's worse is that some enterprises have not received a single order in Q1 and Q2, 2020.

"Since late February, we have accelerated the resumption of production and grabbed quite a few orders from the European and American markets. But now the orders from America have been all canceled, and those from Europe have been put off indefinitely," said a director of Zhejiang Ningbo Jinyuanhong Commodity Co., Ltd.

A foreign trade company, located in Ningbo, east China's Zhejiang Province, which specializes in cosmetics exports, said orders from Europe and America worth about 30-40 million U.S. dollars were suspended in the lastest weeks, while orders worth as many as 4 million U.S. dollars were canceled.

Orders have fallen sharply because of the COVID-19 outbreak, only 30 percent to 40 percent of that of the same period in previous years, said a radio robot manufacturer in Wuxi, Zhejiang Province.

Conforama France, Europe's second-largest household supplies retail chain, will shut down all its outlets in France from March 15, demanding with immediate effect that suppliers stop shipments immediately and buyers hold off the receipt of goods, according to household appliance manufacturers.

--How to survive?

Many foreign trade companies revealed that there are three ways to improve the situation, including reducing production capacity, turning to produce medical supplies, and shifting eyes to domestic markets.

"We are trying to change the production lines and export medical supplies to the EU market. But few products can reach the EU standards," said a person in charge of a meteorological export company in Beijing, adding that few Chinese companies can obtain the EU certification. Small mistakes make significant losses.

Meanwhile, an electrical parts manufacturer in south China's Guangdong Province has also encountered problems when selling export-oriented commodities at home. For example, domestic sales will bring a high impact on the capital flow of enterprises due to credit transactions and the like.

"We're facing very strained cash flow, and in the future, we will have to alleviate cash flow constraints through salary cuts, downsizing, or expenditure reduction," said the director of a radio robot manufacturer in Jiangsu Province.

However, some enterprises have turned the crisis into opportunity through the adjustment of customer structure. Jiangsu Shenghong Group has made positive efforts to adjust customer structure. At present, the production and sales volumes remain balanced in general, and some products are still in short supply.

--Will factory shutdown hurt upstream manufacturing?

"The operating rate of the hardware and electroplate enterprises in the upstream is only 30 percent," said the boss of a lighting company in Guangdong Province, "In Guangdong, there are more than 20,000 enterprises, many of which may be eliminated amid the epidemic."

The boss of a sports goods company in Guangdong Province has taken out a mortgage on his private assets to revive the company's operations.

Affected by the pandemic in foreign countries, many international trade orders for cloth, clothing, home textile products have been canceled. The textile enterprises that have just resumed production face the predicament that the domestic market has not recovered while the overseas market is shrinking sharply.

"We cannot contribute too many taxes and own too many properties like a large manufacturer, so it is difficult for us to gain loans, and basically, the cash flow can only last for three months," according to some small and medium-sized manufacturers.

Some large and medium-sized manufacturers such as Europe's Mercedes Benz and BMW have halted production since March 16.

In the meantime, some businesses are also calling for banks to slightly ease loan restrictions for them and suspend their payment of interests, to help them weather the financial storm.

--China unveils policies to stabilize foreign trade

However, despite the impact of the pandemic, most enterprises have confidence in the series of measures taken by the Chinese government.

The State Council executive meeting held on March 10, proposed five measures to stabilize foreign-funded enterprises. For example, the government encourages financial institutions to increase foreign trade credit, and the credit repayments of small, medium and micro-sized enterprises with difficulties amid the pandemic but promising prospects can be further postponed.

In terms of financial support, the Ministry of Commerce and the Ministry of Finance jointly issued a circular, making it clear that special funds for foreign trade and economic development should be used to encourage the innovative development of service trade, urge more support for credit insurance, and strengthen support for small and medium-sized foreign trade enterprises.

In addition, China Export & Credit Insurance Corporation has joined hands with China Construction Bank to launch special financing services for leading foreign trade enterprises and identified the list of the first batch of enterprises.

As of mid-March, a fund of 69.27 million U.S. dollars had been raised under the support of the special financing service, greatly unleashing the room for enterprises to extend credit and significantly reducing the cost of trade financing.

To reduce the tax burden, the Ministry of Transport and the National Development and Reform Commission lately have jointly released a notice to cut government-set port charges and port facility security fees by 20 percent, and cancel mandatory emergency response services and fees for non-oil tanker cargo ships. (Edited by Jiang Feifan With Xinhua Silk Road, 346129473@qq.com)

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Keyword: foreign trade B&R Weekly COVID-19

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