Quanzhou Foreign Trade Shoe Enterprises Face Cash Flow Test

Although the export volume of spring enterprises has not caused too much negative impact, the European debt crisis is attacking Quanzhou's foreign trade enterprises in another way.

A few days ago, the news from the Quanzhou Municipal Foreign Trade and Economic Cooperation Bureau showed that Quanzhou's foreign trade enterprises are facing the test of cash flow. The main reason is that the European buyers have to stretch their accounts due to the lack of liquidity in Europe under the influence of the European debt crisis.

The lengthening of the accounts period greatly reduced the capital turnover rate of Quanzhou's export enterprises.

In this regard, the Quanzhou foreign trade and Economic Cooperation Bureau suggests that enterprises can ease short-term capital pressure through trade financing so as to prolong the risk of the rush period.

Risk aggregation in European market

Data show that in the first five months of this year, Quanzhou exported more than US $860 million to Europe, an increase of nearly 36%, of which exports to the EU market reached US $743 million, an increase of 39.01%.

If we look at the export performance alone, the export of Chuanqi to Europe can be regarded as a triumph.

However, behind this brilliant pcript, there is a lot of frustration in Quanzhou's export enterprises.

According to the information monitored by the Quanzhou Office of China export credit insurance, the accounts for European exports have increased significantly since the beginning of this year.

Prior to this, Quanzhou foreign trade enterprises generally agreed with buyers, account period is 30 days to 45 days, and this year, many European buyers to extend their accounts to 60 days, or even 80 days.

According to Huang Tianyou, director of Quanzhou Office of China export credit insurance, the extension of accounts is a manifestation of insufficient strength of European buyers. Since this year, European countries have been issuing sovereign debt crisis. "Debt crisis leads to lack of liquidity, and buyers can hardly get loans from banks. They can only lengthen their accounts in order to slow down their financial pressure."

What is even more worrying is that the European debt crisis has not yet affected Quanzhou's exports, but the risk has been gathering.

At present, many enterprises adopt the mode of letter of credit when exporting, but the European debt crisis may lead to bankruptcy of some European banks. "Once a bank goes bankrupt, the letter of credit will also be invalid."

Huang Tianyou said.

Hedge risk through trade financing

It is difficult to accurately estimate the time when European banks are going to be bankrupt, but the pressure brought by the extension of the accounts period has already appeared.

Yang Haichao, general manager of Xingsheng (Fujian) Weaving Co., Ltd., told reporters that many enterprises are keen on foreign trade market, because the foreign trade market accounts for a short period of time, and the speed of enterprise capital turnover is relatively fast.

After 60 days, the advantage of foreign trade has disappeared. Some small and medium enterprises with insufficient financial strength will be more uncomfortable.

On the other hand, the extension of accounts also means an increase in the risk of commercial accounts.

Huang Tianyou told reporters that under the influence of the crisis, the European market is not stable at present. When the account period is lengthened, the buyer may ask the supplier to reduce the price, or simply refuse to pay.

Yang Haichao told reporters that a few years ago, he had encountered the incident of buyer's escape and suffered a lot of losses. Since then, the prosperous export has always adhered to the principle of cash pactions.

However, because of fear of losing customers in cash pactions, there are not many enterprises in Quanzhou that realize cash pactions like prosperity.

And how to ensure the cash flow of enterprises as long as the accounts are elongated is a problem that many enterprises should consider.

For this reason, a relevant person in charge of Quanzhou foreign trade and Economic Cooperation Bureau believes that enterprises can ease financial pressure through short-term trade financing.

According to Huang Tianyou, at present, most banks have opened trade financing business for export enterprises. After receiving orders, enterprises can apply for letters of credit as collateral, and apply for trade financing to banks.

"Although the banking sector has tightened slightly this year, the approval for trade finance is more relaxed than before."

In fact, many enterprises have adopted this strategy.

Data from the Quanzhou foreign trade and Economic Cooperation Bureau show that in the first half of this year, the amount of trade financing applied by Quanzhou foreign trade enterprises exceeded US $89 million, though the amount was small, but it increased by 207.3% over the same period last year.