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The ruble will undoubtedly become the world's worst currency this year, not only hitting Russian companies, but also Chinese exporters. A number of foreign trade companies in the Pearl River Delta told the Southern Metropolis reporter that due to the sharp drop in the ruble, some foreign trade companies in Foshan have received notices of contract breaches by Russian companies. A foreign trade company told the Southern Metropolis reporter that since the beginning of this year, Russia's trade volume has shrunk by half due to the fall in the ruble. The exchange rate difference also eats up a lot of profits, and many companies bluntly consider giving up the Russian market.

Under the strong dollar cycle, not only the ruble has plummeted, but market analysis predicts that emerging market currencies may experience a wave of depreciation. Liu Dongliang, a senior analyst at the financial market department of China Merchants Bank, said that under the current situation of large exchange rate fluctuations, companies should hedge their risks in advance through forwards and swaps.

The risk of exporting to Russia is high

Zhang Yang, the head of the export department of a large sanitary ware company in the Pearl River Delta, was very anxious yesterday. He just received an email from a Russian customer. Because the ruble fell sharply, the customer wanted to lower the price and make a deal at a 20% discount. "This is tantamount to breaking the contract, because we lost 20% off." Zhang Yang complained a lot. Originally, the profit of foreign trade is relatively thin now. It is better not to sell at a 20% discount. Zhang Yang is making two preparations. One is to negotiate with the other company to see if the delivery can be delayed; the other is to help find new buyers for this batch of goods as soon as possible. "Fortunately, it is a general-purpose product, not a customized product." Zhang Yang was a little helpless.

It is reported that the current trade between Guangdong enterprises and Russian enterprises is generally denominated in US dollars. In the case of a sharp depreciation of the ruble, Russian companies need to pay more rubles to reach a deal, which is the main reason why Russian companies are currently breaking the contract.

Another well-known ceramics company in Foshan told the Southern Metropolis reporter that due to the large fluctuations in the ruble, trade with Russia has been basically suspended recently, and the short-term impact is very large. Pan Yongwen, director of the Sanitary Professional Committee of the Foshan Ceramic Industry Association, said in an interview with a reporter from Nandu that few companies have recently reached a deal with Russia out of prudence.

In addition to ceramics, due to the long winter season, most Chinese traders who do business in Russia focus on clothing products such as shoes, hats and winter clothes. However, this year, as the ruble continues to depreciate, many businessmen find that their inventories are gradually accumulating, and some even reach historical highs. Yesterday, a manufacturer engaged in Russia's export business told Nandu reporter, "In Russia now, the price of goods may be one a day. There is basically no way to make money exporting goods to Russia."

"A huge fluctuation such as the depreciation of the ruble by more than 10% a day is rare, and it is beyond the market's expectations. The risk is so great that a group of traders will definitely stop doing business with Russia." Guangdong University of Foreign Studies Chen Wanling, director of the International Economic and Trade Research Center, said in an interview with a reporter from Southern Metropolis yesterday that the exchange rate fluctuates significantly. In order to avoid risks, there will definitely be a substantial reduction in trade volume.

Traders may withdraw from the Russian market

It is reported that, affected by the sharp drop in the ruble, some listed companies have issued performance warnings. Geely Automobile issued a profit warning on the 17th, saying that the devaluation of the ruble has caused foreign exchange losses, and this year's net profit will plummet by about 50% year-on-year. Affected by this, Geely Auto's stock price fell by 17%. It continued to drop 3.09% yesterday. Also as a car company, BYD suffered a crash yesterday, and some sources believe that one of the reasons for the crash is that its sales in Russia were affected. However, BYD denies this, saying that sales to Russia are only a few hundred thousand dollars a year.

In fact, there is a reason for the market's concern about the ruble's slump in car companies. At present, the Russian market has become an important position for China's own brand cars. According to statistics from the China Automobile Association, there are currently more than a dozen brands such as Geely, Great Wall, Chery, Lifan, and Jianghuai that sell complete vehicles in Russia. Among them, Geely, Lifan, Great Wall, and Chery belong to the first echelon of sales.

Glass manufacturers in the automotive industry chain are also not immune. Fuyao Glass, an auto glass maker headquartered in Fujian Province, opened its first overseas branch in Russia last year, and is expected to produce 1 million sets of auto glass annually, and sell 2/3 of its products to Europe and 1/3 to Europe. The glass is sold locally in Russia, and the devaluation of the ruble will also cause foreign exchange losses.

Chen Weimin, general manager of Zhejiang Pujiang Changmin Co., Ltd. told the Southern Metropolis reporter that in the case of huge exchange rate turmoil, he would definitely consider withdrawing from this market for stability. It will be avoided as much as possible.”

In fact, since the beginning of this year, the continuous decline of the ruble has affected the trade of enterprises in the Pearl River Delta with Russia. The person in charge of the export department of the aforementioned well-known ceramic enterprise told Nandu reporters that due to the sharp drop in the Russian economy and the ruble, the company's transaction volume with Russia has shrunk by half this year.

The decline of foreign trade with Russia in key manufacturing towns such as Foshan has been highlighted. According to customs data, from January to October this year, Foshan’s total imports and exports to Russia totaled US$814.7 million, a year-on-year decrease of 7.5%. Among them, the total export value was 765.23 million US dollars, a year-on-year decrease of 9.3%. The decline in the ruble is beneficial to imports. In the first 10 months, the import value to Russia was 49.47 million US dollars, an increase of 36.67%.

However, Xiao Feng, deputy general manager of Shenzhen Yidatong Enterprise, told Nandu reporters that traders exporting to Russia should be relatively frustrated, but it also depends on the trend of the domestic economic situation in Russia, whether purchasing power will really decline. He believes that the Russian market should still have demand for Chinese products, and the bilateral trade volume has grown rapidly for many years. Changes in the trade settlement between the two sides still need to wait and see.

Hedging with financial instruments

Nandu reporter learned from foreign trade enterprises that some foreign trade enterprises will lock up risks through letters of credit. Some foreign trade companies are fortunate to have purchased letters of credit in advance. A Foshan company that also suffered from Russian companies' price reduction told Nandu reporters that the company has purchased credit insurance. If the Russian company breaks the contract, it can also recover a certain amount of money, so that it will not be lost.

In this regard, Pan Yongwen said that the lesson of the ruble's collapse to enterprises is to avoid risks through letters of credit and other methods. However, the person in charge of the export of the aforementioned Foshan ceramics company told Nandu reporters that recently, banks have lowered their credit ratings for Russia, and even some banks have stopped Russian letters of credit.

It is reported that regarding the influence of the ruble on Chinese enterprises, Wang Yungui, director of the General Department (Policies and Regulations Department) of the State Administration of Foreign Exchange, said that China and Russia have close economic and trade exchanges. The exchange rate of the ruble has fluctuated wildly recently, and the State Administration of Foreign Exchange is also closely monitoring it. The devaluation of the ruble will inevitably reflect the appreciation of the RMB to a certain extent. It is recommended that companies use financial instruments such as forwards and swaps to reasonably hedge risks.

"If it is settled in RMB or US dollars, it will avoid the danger. But there are also fewer and fewer Russian dollars. It is still beneficial if the merchants can negotiate with each other to get the settlement in RMB." Chen Wanling said.

Liu Dongliang, a senior analyst at the Financial Market Department of China Merchants Bank, also said in an interview that it is most beneficial for Chinese companies to settle in RMB. At present, the two countries have achieved bilateral currency swaps. This is theoretically feasible, but the key is to see Russian companies. willing to accept.

Liu Dongliang said that after the ruble fell sharply, foreign trade companies that have already reached deals have had difficulty in hedging. However, he pointed out in particular that under the strong dollar cycle, not only the ruble has plummeted, but market analysis predicts that emerging market currencies may experience a wave of depreciation. In the current situation of large exchange rate fluctuations, companies should hedge their risks in advance through forwards, swaps and other methods.

Southern Metropolis reporters Chen Ying and Chen Linlin