The past half year of 2021 can be called the golden age of China’s foreign trade industry.
On August 10, the Ministry of Commerce announced China’s foreign trade performance from January to July: the export and import scales were 11.66 trillion and 9.68 trillion yuan respectively, both hitting record highs for the same period in history, with year-on-year increases of 24.5% and 24.4% respectively. , both record highs in ten years.
Private enterprises are the main force. From January to July, exports by private enterprises increased by 30%, accounting for more than half of exports. Over 110,000 new foreign trade operators have been registered, 95% of which are private enterprises. Among the exported goods, mechanical and electrical products accounted for 60%, a year-on-year increase of 25.5%.
Since the outbreak of the COVID-19 epidemic in early 2020, Chinese foreign traders have experienced a roller coaster-like change in the industry.
In the first half of 2020, due to difficulties in employment, production, and delivery, a number of foreign trade companies failed to survive. As the epidemic spreads around the world, overseas production and operations are suspended, and China’s foreign trade orders increase significantly. Companies that have survived the difficult period are ushering in life. The new problem is that the epidemic has made it difficult for overseas containers and ships to return, and shipping costs have surged.
Right now, in the rhythm of queuing up 24 hours a day to grab cabinets and cabins, foreign traders are struggling to catch up with the wave of growth that has been the fastest in ten years.
1
Foreign trade orders also dropped sharply
At the beginning of 2020, the new coronavirus pneumonia epidemic broke out, and the foreign trade industry was hit hard.
Peng Chao, born in the 1990s, runs a small and medium-sized international freight forwarding company in Guangzhou, connecting air and sea freight in Europe and the United States. He recalled that due to the epidemic in early 2020, many foreign trade factories in Guangdong were shut down. After April, we encountered labor difficulties again. “Many workers did not want to come back, the factory could not start operation, and the rent could not be waived.”
As the epidemic spreads around the world, overseas market demand has become extremely unstable. Offline supermarkets in more and more countries have closed down, market consumption capacity has plummeted, and China’s foreign trade orders have also dropped sharply.
Dong Fei is the business manager of a foreign trade company in Xiamen. The company cooperates with some overseas mid-to-high-end fashion brands to carry out OEM production of clothing import and export. She recalled that in the first half of 2020, many local garment factories and foreign trade companies went bankrupt because they could not receive orders. “Especially those that specialize in outdoor sports products, many went bankrupt last year.”
Some original orders were also canceled for some reason, and the payment for the goods cannot be recovered.
Peng Chao’s partner runs a foundry in Guangzhou, producing OEM headphones for customers in Europe, America, and the Middle East. During the epidemic, the factory completed a production order from Italy, but received a call from the customer’s son – the customer passed away due to COVID-19 and the goods were no longer available. “The products are customized and cannot be sold to others.”
On other occasions, the factory has completed production, but the overseas supermarkets it has been connected to have closed down. “I don’t want the goods, and I don’t want the 30% deposit in advance.”
Under multiple blows, some companies’ capital chains were broken. Peng Chao recalled that before the epidemic, some companies invested in expanding their scale, “for example, buying land to build new factories, the investment was tens of millions.” After the epidemic, because work could not start as scheduled, the boss had no choice but to sell off assets to pay off debts.
In addition to suppliers and traders, freight forwarders and logistics companies have also been affected to varying degrees. Some logistics companies with a single business or heavy reliance on capital failed to weather the storm.
“For example, air freight agencies that only do charter flights usually sign contracts with airlines to act as air freight agents for a certain route, and the deposit is hundreds of thousands. The epidemic has caused flight cancellations, they have no business, and the deposit cannot be refunded. The business can no longer continue.”
During that time, Peng Chao’s logistics company was also struggling to support itself, losing more than 200,000 yuan a month. An acquaintance of a boss fell into this wave of market conditions. “His mentality was shattered and he was racking his brains to think of how to reverse the situation. The business was everything to him. He may be in debt from now on, and he doesn’t know where he is.”
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Return to the world’s factory
The turning point occurred in April 2020. With the epidemic in China under effective control, production has gradually returned to normal. However, the overseas epidemic is still raging, and the resumption of work and production is far from expected.
As the world’s factory, China has ushered in new opportunities to develop foreign trade.
“The world’s demand for Chinese goods has increased since then, and until today, China’s entire foreign trade import and export is growing rapidly.” Chen Haiquan, professor at the School of Management of Jinan University and director of the Guangdong Asia-Pacific E-Commerce Research Institute, told Southern Weekend reporters.
According to data released by the General Administration of Customs, in 2020, the top three commodities with the highest year-on-year increase in export value were medical instruments and equipment, textiles, and household appliances, which increased by 42%, 30%, and 24% respectively.
In August 2021, Li Kuiwen, Director of the Statistical Analysis Department of the General Administration of Customs, said, “In July, my country’s foreign trade continued to maintain a good development trend, and the total import and export value achieved positive year-on-year growth for the 14th consecutive month.” In other words, Since June 2020, China’s foreign trade has begun to recover.
An employee of a consumer electronics company in Shenzhen told a Southern Weekend reporter that 80% of the company’s business is OEM, producing headphones for many well-known companies such as Huawei and Xiaomi.
He said, “After the epidemic, more people have a need to use headphones because they work and attend classes from home. The entire industry has doubled, and we have also grown steadily. The company’s foreign trade exports account for half of the total sales. Overseas supply exceeds demand.”
“Production in Southeast Asian countries and India has not recovered, and clothing orders have flowed to China.” Dong Fei told Southern Weekend reporters that the company’s performance increased by more than 40% in 2020, and has increased by another 40% so far in 2021. “We are going to do 50 million yuan worth of transactions this yearA reporter from Southern Weekend revealed that orders in July 2021 were at least 30% less than the same period in previous years.
“There is no work.” He said weakly, “It has been like this since the beginning of the epidemic. People don’t go out and don’t need to wear false eyelashes.”
He said that some local companies have suspended taking orders, “Mainly ships and The shipping space has become less.” In the past, false eyelashes were mostly exported by sea freight, but now because orders have decreased and most are produced in small batches, more and more air freight is used.
Dong Fei recalled that in May 2021, the cabinets began to become tense, and by the time of shipment in June, “the cabinets were no longer available.” In the past, all of the company’s exports were shipped by sea, but now half of them are shipped by train. “The cost of shipping a piece of clothing by sea is 5-6 yuan, and shipping by air is 50-60 yuan. The price of a piece of clothing by train is somewhere in between.”
The person in charge of a freight forwarding company in Anhui told Southern Weekend reporters that the company undertakes Among the businesses, shipping accounts for the largest share, reaching more than 70%, while railway transportation accounts for the smallest share. Recently, shipping has been severely affected, which has promoted the development of China-Europe freight trains and China-Europe truck transportation.
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Container demand is “fanatical”
CCTV reported that about 95% of China’s international trade is completed by sea . In 2020, China’s seaborne import and export volume accounted for 30% of global seaborne trade volume.
Marine transportation is inseparable from containers, but it is currently difficult to find one.
The person in charge of the above-mentioned Anhui freight forwarding company said that in early July, a ship was booked from Shenzhen to France. “There are 7 cabinets of goods, but there are no containers. Three ships have been delayed, and the shipment will not be shipped until the container is available at the end of July. According to the normal rhythm, it will almost arrive at the destination port by this time.”
Under normal circumstances, After the containers sent from China are unloaded at the destination terminal, they must be reloaded with imported goods and then shipped back to China. Repeatedly.
But now, China’s demand for imports is less and exports are more, so fewer containers are coming back.
“There is no goods to transport back. If you transport empty containers, the ship will be a net loss, so the shipping company will not transport empty containers.” Peng Chao said, “The United States and Southeast Asia have a large backlog of empty containers, but there are no The ship is back.”
The epidemic has also greatly slowed down the speed of handling containers at the terminal. Ports in North America, Europe and other places have been hit hard by the epidemic, and their turnover efficiency has declined, exacerbating port congestion and leading to a shortage of containers.
In late May, an epidemic broke out in Yantian Port, Shenzhen. From 22:00 on May 25, heavy export containers will not be accepted into the gate. Five days later, it resumed receiving export containers that would leave the port within three days. According to China Business News, as of early June 2021, Yantian Port has a backlog of more than 20,000 boxes of export containers. “According to arrangements, it is open to receive 5,000 containers every day, and the current processing capacity is only 1/7 of the usual.”
The price of containers is also rising.
COSCO Shipping Holdings Co., Ltd. (601919.SZ) is mainly engaged in container shipping and related businesses. Its preliminary performance announcement for the first half of 2021 stated, “During the reporting period, the container shipping market continued to improve, and the China Comprehensive Export Container Freight Index (CCFI) increased by 133.86% compared with the same period of the previous year.”
Peng Chao felt that the price of containers had quadrupled. “Last year, a container shipped to North America cost 4,000-6,000 US dollars, and now it has risen to 16,000-23,000 US dollars.” The person in charge of a freight forwarding company in Anhui also said that a 40-foot high container cost 2,000 US dollars in previous years. It costs more than US$6,400 now, and “it’s still hard to find a box.”
China is a major container producer. According to CCTV Finance, more than 95% of the world’s containers come from China. As one of the container giants, the financial report of CIMC Group (000039.SZ) shows that “the industry’s container production increased by 10.3% year-on-year in 2020.”
Zhang Yong, an employee of a container production company in Guangzhou, told Southern Weekend reporters , container production is labor-intensive. “Our factory is not very big, with more than 1,300 workers. Other factories generally have more than 3,000 workers.” The company does quantitative production based on market demand.
“The main problem now is that the boxes cannot be returned, and the demand for boxes is high. Major customers are asking us to take orders through our relationships, and the government has also come to ask us if we can organize double-shift production to increase the volume.”
> “This may be the only time in history when there is a fanatical demand for containers.” Zhang Yong described that in 2017, the container industry had overcapacity, so the industry agreed to basically follow the 511 (5 days a week, 11 hours a day work system) , 611 to produce. “Even during the busiest times, we did not do ‘double shift production’, but just tried to improve efficiency. By 2021, it will basically be based on 511.”
By the end of 2020, the situation had eased. “Boxes are starting to come back slowly.” Zhang Yong said that now the company’s production is basically normal, no one comes to the door to jump in line to ask for additional orders, and empty boxes are also returning one after another.
A friend of Peng Chao’s has been in the shipping business for twenty years. In previous years, logistics companies could predict future business based on past conditions, but they cannot predict this year. “He said that he has never seen things like this in 20 years.”
Chen Haiquan also expressed concern about the uncertainty behind the prosperity of international logistics. He believes that China does not have enough channels for international logistics, and the distribution links at the end of overseas cities are relatively weak.
“We should think of ways to do something at this node,” he said, such as laying out large domestic ports as international logistics hubs; improving financial services in the supply chain; building our own service outlets, including large ships, CSSC’s reserves; it is also necessary to plan and lay out the ability to provide terminal services abroad in the future
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