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English>>China Business

Stronger RMB puts squeeze on shoemakers

By Yu Ran  (China Daily)

07:43, October 27, 2012

An exhibitor and buyer at the 18th China Yiwu International Commodities Fair in Yiwu, Zhejiang province, on Sunday. [Photo/China Daily]

The continuing appreciation of the renminbi is pressing small and medium-sized enterprises, which are already suffering from a lack of overseas orders and rapidly rising costs.

Jiang Kexing, manager of Zhejiang Hongxu Trading Co Ltd in Yiwu, Zhejiang province, said the biggest problem at the moment is the sharp decrease in the number of orders and making nearly zero profit.

"We have to squeeze to minimize the costs of everything including labor, materials and even catering for the workers as well to make really low profits to keep the company operating," said Jiang.

He said the appreciation of the renminbi will definitely increase his company's struggle to survive with limited profits in the slowing economic environment. His company received about one-third of the orders it had last year and expects to have negative profit growth until the end of the year.

With the recession in Europe getting worse, most exporters in China are having severe difficulties in making a profit.

According to the Wenzhou Shoe and Leather Industry Association, more than 800 of the 2,761 shoe manufacturers in the city closed or ceased production in the past nine months.

"Most of those companies got in trouble from the lack orders and almost zero profit resulting from the appreciation of the renminbi," said Xie Rongfang, secretary-general of the Wenzhou Shoe and Leather Industry Association.

Xie said the renminbi appreciation's squeeze on the profit margin of Wenzhou SMEs came on top of the steadily growing costs labor and materials.

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