Hedging And Risk Avoiding In China'S Clothing Industry

Learn to use hedge to reduce exchange rate risk, learn to establish a virtuous circle with channels and suppliers, learn to rely on upgrading equipment to reduce costs.

In 2008, it was a year for Chinese clothing enterprises to cross the "life and death robbery".

"This year, more than 8000 enterprises in the PRD have gone bankrupt or pferred."

This is the survey data released by Professor Huang Weiping of Renmin University of China in May 4th this year at the Asia Australia Forum held in Guangzhou.

And the Yangtze River Delta, Shandong Peninsula, Fujian province and other textile, clothing, shoes and hat business intensive areas, the situation is almost the same.

　　用套期保值规避汇率风险

China has more than more than 7000 textile production enterprises, and a large number of small textile enterprises. However, hedging can avoid the risk of foreign exchange forward payment.

The exchange rate risk of the depreciation of the US dollar and the appreciation of the renminbi is one of the factors that lead to the decline of orders for domestic garment enterprises. Under such circumstances, manufacturers and purchasers are afraid that one should not dare to take orders and the other is difficult to place orders.

Both sides will spend a lot of energy on clearing currencies and clearing rates, and may eventually be unable to reach a compromise.

It can be said that the volatility risk of the RMB exchange rate reduces the export order of domestic garment enterprises to a certain extent. If the two party can choose the way of hedging the exchange rate and avoid the exchange rate risk, the negotiation problem can be solved, and the domestic and international Futures Company can help the two parties to solve the problem.

Let's look at a precedent in the international clothing market.

In June 15, 2007, a Japanese company exported a number of garments to US companies. At that time, Japanese companies could earn 5% of their profits, but the sales contracts of both sides agreed that "the US company paid 10 million dollars in September 14, 2007 to Japanese companies."

In order to avoid exchange rate risk, Japanese companies signed a sales agreement with US companies to hedge pactions at the same time, and bought yen futures contracts equivalent to US $10 million in the money market in September.

Since then, the yen has continued to appreciate. By September 14th, when the Japanese company received payment from US companies, the yen appreciated by 6%. So, when Japanese companies received payment from US companies, they placed the Japanese yen positions on the futures market and kept their profits.

　　与国内企业开展良性合作

Domestic supplier production, channel sales, brand enterprises are responsible for timely repayment and payment on time, which can cause vicious circle. Therefore, the establishment of a virtuous circle is a topic that export oriented enterprises need to learn.

Export garment manufacturers should pay attention to the domestic market and seek to make OEM processing for domestic enterprises, so as to supplement the deficiency of international orders.

There are several reasons why manufacturers are willing to make international orders: first, the general quantity of international orders is relatively large; two, generally speaking, returns are generally in a timely manner.

Domestic orders are just the opposite.

In fact, the domestic clothing brand operators also have their own pains in making OEM. First, the delivery period of goods can not be guaranteed, affecting the sales cycle and causing inventory. Second, sales difficulties and inventory cause financial difficulties of brand enterprises; third, the funds of the brand enterprises are difficult, and it is difficult to refund the garment manufacturers; fourth, clothing manufacturers can not guarantee the production of brand enterprises.

This is a vicious circle.

The key is that if we can promote mutual trust, mutual help and tacit strategic alliance, we can break this "vicious circle" and form a virtuous circle.

The following example of a company can solve this problem well.

At the beginning of 2008, the Zhejiang Wenzhou Mogao Garments Co., Ltd. held a supplier strategic cooperation conference. At the meeting, Mogao Garments Co., Ltd. signed a strategic cooperation agreement with the suppliers of surface accessories and garment manufacturers. In the agreement, Mogao company ensured the balanced orders and timely reimbursement of suppliers and manufacturers, while suppliers and manufacturers also ensured the delivery time and quality of Mogao company.

Through this strategic cooperation, the clothing company has greatly upgraded its brand in the market because of its punctual delivery and good product quality, and has rapidly expanded its channels and has taken a favorable position in the competition with its peers.

Update equipment to reduce labor cost

Although updating equipment costs money, it can reduce all kinds of expenses and save long-term expenses.

The application of new technology and new equipment can play an important role in improving efficiency and reducing labor costs. The author went to some garment enterprises in Zhongshan, Guangdong, and found a company in Zhongshan Town, Kun Xi Village Industrial Zone, the flying slave garment factory. They changed all the equipment into new equipment.

One is to reduce the electricity consumption, which can save about 1/3; the two is to greatly reduce the line loss; the three is no longer need to cut workers; four, the equipment will not be stained with oil on clothing, reducing the cleaning and integer procedures and labor.

　　外销企业突破困境的方法

In the case of changing RMB exchange rate, manufacturers and buyers fear that orders are often aborted.

In fact, the choice of hedging operation can solve this negotiation problem.

For brand clothing operators, they do not produce clothing, but hope that OEM enterprises can deliver goods on time and ensure quality. Therefore, from the beginning of supply to the sales of channels, the influence of one ring and one link is slow, and the brand is dragged down.

Therefore, how to establish a virtuous circle becomes very important.