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Ruble depreciation, profits of clothing companies exporting to Russia decline



The depreciation of the ruble has had a greater impact on Chinese garment export companies. Export orders have declined. Russian merchants have frequently defaulted on payment and breach of contract, which has …

The depreciation of the ruble has had a greater impact on Chinese garment export companies. Export orders have declined. Russian merchants have frequently defaulted on payment and breach of contract, which has damaged the profits of garment companies. In this regard, industry insiders suggest that when Chinese garment export companies conduct business with Russian companies, it is best to use RMB as the settlement currency, which can effectively reduce exchange rate risks and exchange costs.
Recently, the ruble has depreciated sharply, and my country’s clothing companies exporting to the Russian market have found it difficult to do business. Export orders have declined, and Russian merchants have frequently defaulted on payment and breach of contract, hurting the profits of clothing companies. In this regard, industry insiders suggest that when doing business with Russian companies, it is best for Chinese garment export companies to use RMB as the settlement currency, which can effectively reduce exchange rate risks and exchange costs.
It is difficult for export companies to do business
The depreciation of the ruble has had a greater impact on Chinese garment export companies. “In the first half of this year, 1 U.S. dollar could be exchanged for 33 rubles, but now it can be exchanged for 66 rubles. Due to the depreciation of the ruble, some Russian buyers have asked us to postpone delivery of goods.” A person in charge of a clothing export trading company said.
The reporter learned that the recent fall in the ruble has led to an increase in the cost of purchasing goods in Russia. The unit price of clothing has increased significantly locally, which has affected the sales of clothing products. my country’s export orders to the Russian market have fallen sharply. “From the current point of view, the overall clothing orders in the Russian market have dropped by 60%. Some clothing companies are slowly surviving, while others have directly closed down because of the difficulty in doing foreign trade business.” The person in charge of a clothing export company in Hangzhou Mr. Renwang sighed.
Russian merchants default on payment
According to the person in charge of a clothing export company in Ningbo, the company recently encountered a breach of contract by a Russian company. “In August, we exported goods worth US$200,000 to a Russian company and agreed to pay within 90 days. Unexpectedly, in November, the customer still had no movement. We pressed the other party for payment, and the other party said that due to the sharp depreciation of the ruble against the US dollar, The cost of bank loans has increased, the capital chain has broken, and it has filed for bankruptcy.” Mr. Yang, the person in charge of the company, said helplessly.
A person in charge of a textile export company who did not want to be named said that the company has had foreign trade relations with Russia since 2012. The annual transaction amount is more than 5 million U.S. dollars, and the buyer has never been in arrears before. “In January this year, we exported nearly US$980,000 worth of goods to Russian customers. We originally agreed to pay within 90 days, but by the April payment period, the customer still had not paid. Russian buyers told us that due to banks tightening credit, it turned out that Due loans cannot be re-lended, resulting in a huge funding gap, and due to the sharp depreciation of the ruble against the US dollar, it suffered a large loss in the first quarter. In addition, due to the impact of the crisis, its sales in the Ukrainian and Polish markets have been difficult, so It will be difficult to repay the futures payment and will file for bankruptcy.” The official said that once the buyer files for bankruptcy, the company may face a significant risk of not receiving money.
RMB settlement reduces risks
Guangdong credit insurance professionals pointed out that the depreciation of the ruble directly increased the import procurement costs of Russian companies. Russia’s repeated interest rate hikes will make it more difficult for Russian domestic enterprises to obtain financing. A considerable number of importers may require suppliers to provide longer credit terms to achieve financing, or they may not be able to obtain financing and the capital chain will be in crisis; the decrease in personal retail loans will also Suppress domestic consumption in Russia.
Some people in the industry said that the higher the degree of currency depreciation, the greater the damage to the buyer, and the lower the willingness and ability of the buyer to pay for goods, which may in turn pass the losses to my country’s export companies. When the importing country’s currency depreciates significantly, it often leads to a high incidence of buyer defaults.
So, how can clothing import and export companies avoid the risks brought to them by the depreciation of the ruble? The person in charge of the Ningbo Municipal Foreign Trade and Economic Cooperation Bureau suggested that export companies and Russian companies should switch to RMB settlement when conducting business. “Using RMB as the settlement currency can effectively reduce exchange rate risks and exchange costs. In addition, companies can also effectively reduce exchange risks by building factories locally.” In addition, some analysts suggest that my country’s clothing import companies can take this opportunity to increase investment Import intensity to Russia. The price of imported goods and raw materials from Russia has dropped, which is good news for importing companies.

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Author: clsrich

 
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