Export, together with investment and domestic demand, as the three elements which promote economic growth, is one of significant motive forces to ensuring each industry to orderly develop to guarantee the orderly development of all walks of life. Since the entry into WTO, China depending trend to the export is sharply climbing, in recent two years, influenced by the decreasing economic growth of America and other developed countries, China’s export is confronted with severe ordeal. And the following appreciation of RMB, price rising of the raw materials, the increasing of labor cost, and the declining of export rebates etc make the situation from bad to worse. These factors directly lead to the bankruptcy of some enterprises which are weak in risk resistance and incomplete in the system. In 2008, under the background of increasing export risk, what should the solar shading industry that is on the way to integrate and reorganize do?

 

 

The rising rate of CPI in 2007 is closely related to the market, a series of up and adjustment like appreciation of RMB, the price rising of raw materials, the increasing of labor cost, and the declining of export rebates etc caused the stack effect, which is constantly making the profits of enterprises reduced. For a whole year, the exchange rate of RMB against US dollars broke a higher record for many times. No matter the government aimed to shake off the pattern of US dollars to prepare RMB as hard currency or to meet the expectation and stand for the pressure of RMB’s appreciation from other countries and various resources of capitals, the fluctuation of the exchange rate of RMB made the export-oriented enterprises feel at the margin of profits. Currently, many domestic export-oriented Short and Medium- Sized Enterprises is characterized by exporting the labor-intensive and low value-added products, mainly relying on the advantage in price in the international competition with a narrow profit margin. So the appreciation of RMB is directly crippling their advantages of the products in price. It is estimated that when RMB is appreciated for 10%, the export growth speed will slow down for 3% to 4% and the unit price of some exported products will rise accordingly at a new higher rate. For instance, the average unit price of exported outdoor umbrellas in 2007 is 1.38$/per unit, with an increase of 16.93% year on year.

 

It is no doubt that the forced price rising of exported products will make the products” made in China” gradually lose the advantage of good quality with low price in the international market. In addition, the United States, one of the three trade cooperative partners of China, suffered the most serious loan crisis in the recent history, which made America economy step into recession and impact its consuming credit funds, and in return reduced the consuming demand of “Made-in-China” products. Now, China’s export has been besieged on all sides, it is no exception with exporting of the solar shading industry.

 

 

As a brand-new industry in line with the national policy of energy conservation and emission reduction, solar shading industry boasts the advantage of China manufacturing, continually exporting domestic exceptional products and raw materials to the foreign countries. No matter the finished products, semi-finished products or the processing of raw materials, for current various stack effect of exporting, China solar shading enterprises export needs skillfully transfer the weal and woe.

Through visiting a number of solar shading enterprises, it is known that the markets where China solar shading industries exports are mainly located in the trade zones of American Continent, Europe, Southeast Asia, and Middle East etc. Due to the regional sunshine strength, the local residents usually purchase solar shading facilities as civil sun shading. Therefore, the civil markets of these trade zones have broad prospects. Viewing from the distribution of the exported areas, the American market just accounts for a small portion. A majority of enterprises seems not totally relying on US dollars. While according to some enterprises, the trade in Southeast Asia and Middle East always settle the accounts in US dollar. Thereby the exporting of Solar shading enterprises in China still will be affected by the adjustment of exchange rate of RMB against US Dollar.  How to reduce the adverse effect caused by the fluctuation of exchange rate to the lowest extent is naturally become the key index to judge the success or failure of the exporting enterprises. Facing the problems, whether the enterprises can bring the demerit and merit under its control will directly reflect the living strength of solar shading enterprises in the market, and the accumulation of practical fighting experience and the capabilities of solving problems could in return consolidate its status in the market economy. Following are the cases of solar shading enterprises on how to successfully survive the woe and avail themselves in the weal of the market.

 

During the interview, Mr Jin in the tubular motor analyze to the reporter, the tubular motors are sold well in the European and American market. Generally speaking, each window of the ordinary residents just needs two motors to install on the solar shading facilities, while for outdoor solar shading, three motors are needed. Judging by this situation, the import amount of motors in European and American market is quite considerable. However, each foreign market has specific product certification system. For example, American advocates UL Certification, while EU countries accept CE certification. Many enterprises attach much importance to the investment on certification in the early stage. By contrast, UL certification is more expensive, which causes a heavy burden for those enterprises who wants to export to America. And analyzing current situation of the appreciation of RMB against US Dollar, the enterprises also lost the advantage to participate in American market. So at this time, to choose American as exporting market seems no profits to get.

 

Profit is the focus of enterprises doing business, on the condition that exchange rate and price of raw materials are adjusted,  the enterprises need a comprehensive analysis of the export market background, the development of comprehensive export orientation to turn the adverse tide of exporting. The latest statistics show that China’s exported machinery and electronic products to EU grew by almost 35.2%, exceeding America to become the largest export market for mechanical and electrical products in China. Obviously, many enterprises have timely transferred their export orientation after a systematic analysis on American market profits margin. In addition, According to experts’ predication, the bi-lateral trade volume of China and ASEAN is expected to exceed $ 200 billion. Facing such substantial market opportunity, solar shading enterprises should accurately identify entry points and expand the exports to the ASEAN region (the Philippines, Malaysia, Thailand, Brunei, Singapore, Indonesia, Vietnam, Myanmar, Laos and Cambodia). Of course, the export policy in surrounding areas also should be paid much attention. It is known that the recent EU market constantly use the 'green instructions' to increase the testing costs of China's mechanical and electrical products and increase import threshold, therefore the motor exports in 2008 should be cautious.

 

To Increase imports and offset risks against export exchange rate

 

The exclusive advantage of RMB’s appreciation is reflected by the import trade. By contrast, the enterprise could cost less to obtain the cargos in same quantity. Many solar shading enterprises specializing processing and trade have realized such advantage and began to increase the international purchase to alleviate the export loss internally. They choose to export products assembled by imported parts and components to offset the export exchange rate loss by increasing import on the premise of unchanging price of imported products and parts. And combing the weal of import with the woe of export also becomes the effective measure for solar shading enterprises to evade risks. Statistics of trade term of China’s exported umbrella collection shows that the processing trade with supplied materials is decreased compared to last year, and export amount is $110 million with a decrease of 10.55% year on year. The amount of processing trade with imported materials is $ 183 million with an increase of 18.80% year on year.

 

 

 

The ability of shift the business cost determines the enterprises’ capability of getting profits. Usually, the cost passing on is divided into two steps. i .e, cost control and cost passing on.

The cost control emphasizes the methods of internal cost control of enterprises; while the cost shift focuses on the supply and demand relations. In each industry, the price change of upstream products and downstream products is interlocking. The solar shading industrial chain is comprised of upstream fitting supplying enterprises, fitting procurement enterprises of middle reach and downstream agents of finished products as well as some small workshops. The most popular one is the solar shading enterprise of middle reaches, for they export most, have fixed suppliers and boast their own brands as well as the huge sales network, but not as huge as the upstream enterprises on the scale. Supposing the upstream fitting supplying enterprises such as Nice, Somfy, Baston and other outstanding suppliers conduct the cost shift to the fitting procurement enterprises in the middle reach, the production cost of middle-reached procurement enterprises will increase. . And if the middle-reached fitting procurement enterprises import the finished products in previous price, it will have limited ability for cost shift.

But if they turn to their downstream agents, the cost rising extension will be weakened. As a superficial looking, the relative profitability of upstream fitting supplying enterprises is strong, while the profitability of middle-reached enterprises is relatively weak. Once the whole industrial chain rises in price simultaneously, every ring in the chain will get benefits, but all the pressure will be shifted to domestic end- consumer and foreign purchasers. Actually, the end consuming price is the channel for the whole industrial chain to achieve their values in the commodities market. Therefore it determines whether the whole industry could make profits and develop or not. Only reasonable end-price can make the whole industrial line in good operation state and ensure every link could make profits in reasonable way. In the same way, only the reasonable international trade price can keep the orderly development of our economic trade with foreign countries. “No weal without woe”, the weal and woe can be shifted in an instant, a tiny carelessness may affect the healthy development of the industrial line even the national economy.

 

 

In order to safeguard the orderly development of Solar shading industry, many enterprises took the necessary measures respectively against the cost shift. i.e., to control cost by modifying profit-making mode, reducing management cost and select production line with strong energy-saving effect etc so as to alleviate risks internally; or to increase the investment in research & development to raise the export price by improving the quality and added value of products, following the road of “create value”.

 

Mr He, General manager of Changzhou Iryace Textile Co., Ltd said, “in the interview that Iryace will gradually complete its system innovation in recent years, select the most outstanding management mode, and constantly strengthen product Research & Development and design, also will actively response to the suggestions from customers and alleviate from internal side the negative impact brought about by the exchange rate and raw materials. For the previously-signed foreign trade order, the losses caused by the changing exchange rate weren’t imposed on the foreign businessmen, as we have to adhere to the credibility to the foreign purchasers even if no profits can be got.” AS an exceptional upstream supplier, Changzhou Baston special Textile Co., Ltd also took the measures to adjust its profit-making mode on the premise of guaranteeing the interests of customers and employees, never transferring the pressure to the middle-reached or downstream enterprises and overseas purchasers. General manager Chen expressed his hope that more solar shading enterprises could make efforts to become the upstream enterprises in the same industry, and seek the common developments and make this industry in more order.

And the general manager Ma of Ningbo Activa Leisure Inc appealed,” The enterprises should keep their credit, and guarantee the quality of products; should never do shoddy work and use inferior materials in the name of profits shrinkage or even broke the contract. Don’t be afraid of price rising of the raw materials and the appreciation of RMB, enterprises could seek cooperation to improve their competitive strength and alleviate stress from the cost rising.

 

 

The price rising trend doesn’t fade, so the export crisis in 2008 is still accumulating, and the solar shading enterprises have actively resolved the risk of export for easing the tension of “guests do not accept price increases, products won’t be sold without raising price” under the premise of not disobeying the moral conscience. An old saying goes,” "People in the world will undergo the weal and woe through the Lifetime, that is to say,  one more difficult thing make difficulties decrease by one; a blessing will be increased if one happy thing is missing, bearing such attitude in life, you can live a calm and happy life."

The same rule can be used in the operation of enterprises. To calm down facing the export market and use the effective method of resisting stress to head off a disaster, you can make the enterprises survive for a long time.

 

 

In fact, there are many ways to resist stress, we also suggest that the solar shading enterprises with abundant assets and rich experiences have a try to establish factories and start production directly in the export-oriented countries and create their own brands. In this way, they could not only evade the profits decrease caused by the appreciation of RMB by reducing costs, but also could save the expensive freight. Of course, we still need the support from government to boost the stable development of the industrial chain of solar shading industry so that every node from the enterprises concerned to the end-users could enjoy the rights of shared interests.