Editor’s note: From December 2014 to the present, the Russian economy has continued to weaken, and the sharp depreciation of the ruble exchange rate has triggered a series of chain reactions. Judging from the enterprises exporting to Russia interviewed by our reporter in the Yabao Road business district, due to the depreciation of the ruble, they are faced with the situation of being owed payment or having difficulty recovering the final payment, which makes the merchants uneasy. As the ruble exchange rate continues to fluctuate, some companies can only temporarily withdraw from Russia or suspend business with Russia. So what should export companies do with their trade with Russia in 2015? Should we keep moving forward, or should we stop and wait and see? By interviewing industry experts and leading brands in trade with Russia, we hope to give more companies some reference.
ExpertsInterpretation
Mei Xinyu, researcher at the Institute of International Trade and Economic Cooperation of the Ministry of Commerce:
Stick to the market and change the place of payment and settlement
“Made in China” occupies an important position in the Russian textile and apparel market. In 2013, China exported US$1.91 billion of fur, artificial fur and their products to Russia, and exported US$9.77 billion of textile raw materials and their products, including US$3.20 billion of knitted or crocheted clothing and clothing accessories, and US$3.20 billion of non-knitted or non-crocheted clothing. and clothing accessories amounted to US$3.39 billion, and other textile products, complete sets of items, and used textiles amounted to US$1.62 billion. However, the ruble crisis that broke out in 2014 severely impacted Chinese textile and apparel exporters in the Russian market. In this case, how should companies respond to this impact?
Companies that want to operate in the Russian market for a long time rather than just grab a handful and leave should still stick to this market. Although the cost is high, it is worth the efforts of the company. From a political perspective, this is a country with strong social cohesion, tenacious national will, and a strong leadership core. The Russian economy will not completely collapse due to the long oil bear market and the ruble crisis, but it is possible to strengthen its economic system during the crisis. flexibility and, to a certain extent, achieve a renaissance in the manufacturing industry. At the same time, as Russia’s strategic partner, China has huge demand for its products. On the one hand, it provides insurance for the Russian economy. On the other hand, it also means that the relationship of mutual benefit and mutual assistance helps “Made in China” maintain and expand the market in Russia. share. Even in the worst case, our country can maintain its share in this market through barter and other forms.
In addition, Russia has great market potential and is worthy of companies to stick to, but the severity and durability of this crisis require companies to have enough patience. On New Year’s Eve, the Russian government announced early that the ruble crisis was over. This was actually an attempt to calm market expectations and was not consistent with the facts. The oil bear market that began in 1980 has lasted for nearly 20 years, and the current oil bear market is likely to last at least 10 years. Russia’s industrial structure adjustment will take time, and the current dependence on the oil and natural gas industry cannot be changed for the time being. In 2015, the Russian Federation’s fiscal budget was formulated based on an oil price of US$60. In fact, the average oil price throughout this year is unlikely to reach US$60. It is entirely possible that oil prices will stay at US$40 for a long time, or even break the bottom line of US$40. This market situation determines that the Russian economy is likely to shrink to a certain extent this year, and the demand in the Russian consumer market will definitely decrease.
At the same time, due to the substantial depreciation of the ruble exchange rate, the prices of Chinese textile and apparel products denominated in rubles have increased significantly. It will take some time for Russian consumers to accept the new price level. Therefore, the shrinking Russian clothing consumption demand will still be temporarily frozen for a period of time. It is estimated that Russian consumers will not truly accept the new price level until the second quarter, and then Russia’s shrinking consumer demand will really start. Therefore, Chinese export companies to Russia will have to survive at least until that time.
In the next one or two years after surviving the freeze period, my country’s textile and apparel exports to Russia may have to moderately increase the proportion of mid- to low-end products in order to adapt to the reality of the declining purchasing power of Russian consumers.
In order to better cope with the current impact, our country’s export companies need to solve the problem of losses caused by Russian partners’ default due to the ruble crisis. For these issues, if there are corresponding clauses in the contract, you can claim; if the enterprise cooperates with platforms such as domestic asset management companies and equity exchanges, the enterprise can transfer the subrogation rights of accounts receivable on these platforms to Try to solve the problem of capital turnover, or try to transfer products originally manufactured for the Russian market to other markets.
Due to the impact of the ruble crisis, the pressure of a sharp increase in exchange rate risks will inevitably increase the demand for settlement in hard currencies such as RMB/USD in Sino-Russian trade. Even in the Russian domestic market, currency substitution (that is, at high prices) In countries with inflation and sharp currency depreciation, objective demands for hard currency, foreign currency or gold to replace local currency for pricing and settlement) will also emerge. If the pricing and settlement in cross-border trade can be done in RMB or US dollars, the ruble will not be used. Even in the Russian domestic market, the pricing and settlement of transactions between Chinese businessmen can be switched to RMB or US dollars to reasonably avoid risks. Although Russia prohibits the direct use of foreign currencies in the domestic market, Chinese businessmen in Russia and their Russian trading partners may wish to take advantage of the Shanghai Free Trade Zone and open free trade in China’s free trade zones.Trade accounts, in which RMB or US dollar funds are stored, transactions occur in Russia, and payment and settlement can be achieved through free trade accounts in the Shanghai Free Trade Zone, thereby circumventing possible Russian controls.
In the textile and clothing trade with Russia, one thing that needs to be emphasized is that when developing economic and trade with Russia, we should not only focus on large enterprises and large projects, but also pay attention to the development opportunities of small and medium-sized enterprises and individual traders. During the oil bull market, Russia had strict and changeable policies towards Chinese retail and wholesale traders, but this approach only raised the prices of daily consumer goods for ordinary Russian residents.
Corporate Voice
Wang Xiaoyan, Operations Director of Dongshang Garment Co., Ltd.:
Retract inward and expand outward to actively exert force
Facing the current severe trade environment in Russia, how to respond intelligently is a difficult problem faced by enterprises. I believe that whether it is a crisis or an opportunity, the most important thing at the moment is to be yourself. Faced with various unfavorable situations, Dongshang actively adjusted its strategy and put forward the management concept of “contracting internally and expanding externally, and reorganizing resources” to respond to market changes. On the one hand, by integrating and optimizing Dongshang’s internal and external resources, it reduces supply chain and corporate management costs, improves work efficiency and product competitiveness; on the other hand, through the “going global” marketing strategy, it creates good opportunities for overseas dealers. business environment and look for new profit growth points.
In terms of “internal contraction”, in order to integrate supply chain and management resources, Dongshang merged the four independent brands of Snowimage, Snowimage Junior, VLASTA, and MISUN into two major operating departments: Snowimage and Snowimage Junior, as well as VLASTA and MISUN. Maximize the integration of R&D, procurement, production and management resources to reduce supply chain production costs and communication costs with dealers. Secondly, the company focused on launching the “Quality Project” in 2014. Through a series of innovations and reforms, the company gave full play to the wisdom and talents of its R&D and design personnel to create high-quality clothing that is “endurable, durable, and durable” to better serve customers. Quality is recognized by more consumers.
In terms of “external expansion”, Dongshang adopts the strategy of “going out” and establishing cooperation with local shopping malls in Russia. In 2014, Dongshang established a cooperative relationship with Miga, a high-end shopping mall chain in Russia, and opened SI stores in its shopping malls in Ufa and Samara, Russia, and the operations are going well. In October last year, according to Miga’s official statistics, the SI store in Ufa City ranked first in the Miga shopping mall in terms of effectiveness that month. SI stores located in Miga shopping malls in Omsk and Novosibirsk will also be put into operation this month, and by then there will be 4 SI stores. In the next three years, SI stores plan to cover 14 MIGA shopping malls in 11 cities. In addition, the company has also actively reached a preliminary cooperation agreement with the top management of Leo Group and Planet Mall to create a good operating environment for dealers.
On September 15, 2014, the SNOWIMAGE brand successfully entered the Alibaba Global AliExpress (aliexpress) platform. Dongshang has become an important strategic cooperation customer of AliExpress Boutique Mall and the first AliExpress Boutique Store. Highly recommended merchants. In 2015, Dongshang will strive to create an e-commerce model of “Beijing headquarters receives orders – overseas dealers ship goods” to find new profit growth points. In addition, in order to enhance brand awareness, Dongshang invested US$80,000 in filming SNOWIMAGE TV and radio advertisements in Moscow last year, unifying the form and content of terminal advertisements and enhancing the brand image. In 2015, the company plans to invest in all-Russian TV advertising in the fourth quarter of Russia to further rapidly increase brand awareness.
