European Debt Crisis Affects China's Export Enterprises

The intuitive manifestation of the European debt crisis is that some European countries have encountered the predicament that sovereign debt may default. Greece and Portugal have already shown problems, but Spain, Italy and Other countries also face the risk of debt default. The current European debt problem continues to deteriorate, and the scale is much larger than a few months ago. To date, Greece, Ireland, and Portugal have applied for international aid loans to overcome difficulties under pressure. But the market believes that the bigger problem lies with Italy and Spain. Greece's GDP is only 2% of the total GDP of the euro area, while Italy and Spain are the third and fourth largest economies in the euro area. Once Spain and Italy have the risk of default, the problem is far more serious than that of Greece and Portugal.

The European debt crisis is still part of the financial crisis that broke out in 2008. In our opinion, although the European debt crisis has shown the financial risks of European countries, the root cause is the problems with the economic structure of these countries. In essence, these countries have enjoyed economic results in advance in the form of debt, but economic growth cannot support such consumption levels. To put it bluntly, it is that some countries do not work well but are hungry for pleasure and enjoy a high level of welfare. The European debt crisis tells them that this game of eating bread is not sustainable. In fact, it is precisely because of this reason that the hard-working Germany has a lot of controversy over reaching out to the lazy Eurozone brothers.

The complexity of the European debt crisis is related to the euro system. The euro zone adopts a unified monetary policy - unified with the euro as a currency and adopting a uniform interest rate policy, but the fiscal policy is scattered in the hands of EU governments. This is considered to be the reason for the current debt crisis in Europe. Under this mechanism, EU countries have issued a large number of euro-denominated bonds to promote their economies. However, central banks in various countries have no ability to issue Euro currency at all. Once some countries are not financially self-disciplined, the scale of their debt will be out of control, beyond the country's economy can withstand. When the global economic and financial system is in normal operation and liquidity is abundant, the game of borrowing consumption can still play. When the financial crisis emerges, the game immediately encounters a crisis.

Under the unified currency mechanism, the European Central Bank (ECB) should assume the capacity of the ultimate guarantor, that is, the debt of the euro zone member countries pocketed. However, the role of such a final guarantor exists only theoretically. Now that the European Central Bank can reach out to help, it is unwilling to take on this role. Some analysts believe that the reason is that providing such guarantees will send wrong signals to the political circles of European countries. It will create a new temptation and prompt governments to continue issuing bonds excessively, because anyway, the European Central Bank will pay the bill. As a result, the European Central Bank has come up with an alternative program, the European Financial Stability Fund (EFSF), to solve this problem. At present, the fund has 440 billion euros in funds for the purchase of bonds in European debt crisis countries.

But does EFSF have enough capacity to prevent the spread of the European debt crisis? Is it possible to print unlimited amounts of money like the Fed or the People's Bank of China? Due to the lack of control over the euro zone's financial resources for member states, it is almost impossible for the European Central Bank to solve problems by printing money. At present, the European Central Bank adopts the method of purchasing member bonds in the secondary market to try to restore market confidence and prevent the European debt crisis from spreading to other member countries. For example, the ECB invested 6.65 billion euros in the week to buy the member bonds in the week of August 26, 2011. It had previously purchased 14.3 billion euros of bonds in the week of August 19, and earlier in the week of the 12th, it bought 220 bonds. Billion euros of bonds.

However, this rescue action by the European Central Bank is not favored by the market. Ma Jun, chief economist for Deutsche Bank Asia, said that currently the European Central Bank is in charge of buying Spanish and Italian government bonds in the secondary market, barely suppressing market interest rates. It is only an expedient measure to solve the problem. The EFSF took over.

At present, the European debt crisis has caused considerable losses to European financial institutions. The International Accounting Standards Board (IASB) stated that in the recent results announcements, some European financial institutions should carry out more extensive loss write-downs on their holdings of Greek government bonds. After Greece received the second round of aid, financial institutions had already written down billions of euros in Greek government bonds they held. Some banks and insurers have reduced their invoicing ratio by 50%, and some have only 20%. Banks and insurers who wrote down their write-downs at market prices suffered even more. For example, the Royal Bank of Scotland has made a write-down of 733 million euros against its 1.45 billion euros Greek government debt assets, and its writedown ratio is as high as 51%.

What the market is worried about now is that if countries such as Italy and Spain, which have large bond market sizes, are in crisis, global investors completely lose confidence in the solvency of their bonds, and there is no European Central Bank as the ultimate guarantor, then even the EFSF's districts The 440 billion euros is just a drop in the bucket, and it is unable to curb the continued deterioration of the European debt crisis.

French economist Christian? St. Etienne once put forward five main points in the book "The End of the Euro": First, the euro area is not the optimal currency area. Second, the euro zone therefore needs to have three characteristics of a unified country: the "economic government", the federal budget, and a framework for competition policy. Third, the gap between the surplus groups represented by Germany, which represents one-third of the euro area's population, and the deficit groups, including peripheral countries such as Portugal and Greece, will increase. Fourth, there may be punitive measures to make the deficit countries fall into long-term slow growth. Fifth, the euro zone has the potential to collapse, "either a catastrophic disintegration or a controlled disintegration." This kind of warning does not not become a reality.

At present, there is a huge controversy over how to rescue the European debt crisis in the EU and the euro zone. The core countries of the euro zone economy are Germany and France, but Germany and France have different opinions on the rescue. Zhong Wei, an economist at Anbang, believes that “if the euro zone is to promote fiscal and taxation integration and regional integration plans in order to solve the European debt crisis, then Germany and France will be bound to bear a long-term and huge financial burden.” Zhong Wei also said, “ France’s political will and lack of economic capacity, and Germany's economic ability is good but its political will is weak. This is Germany and France's hardest constraint on the substantive promotion of European economic governments and European bonds in the next three to five years.” Germany has an important reason for doubts about the rescue of the debt crisis in Europe.

However, if the European debt crisis continues to deteriorate, the euro zone and even the EU may collectively sink, and the euro system will collapse. Under this threat of reality, Germany is also reaching an agreement. We have noticed that before the German parliament finally discussed the resolution on the government’s debt crisis in Europe, the German Industry Association appealed on August 29, 2011, in the media, that even if it will bring some losses for domestic interests, it should also save the euro at all costs. However, this policy claim differs from the government. Although the German government united with France to support the euro, but in consideration of its own interests, in the decision to save measures on the reservation, the German Finance Minister Schäuble said that Germany "will not pay any price" for the debtor countries to provide support.

On the issue of how to support debt crisis countries, the Merkel administration has encountered considerable resistance at home. Two weeks ago, French President Nicolas Sarkozy stated after meeting with Merkel that Germany and France have agreed to establish a “European economic government”. Later, the German government spokesman denied Sarkozy's statement that the German government only wants to urge the EU to establish an institution and has "enhanced economic and financial control over the euro zone." Now, the German economic community has continuously warned the government that the euro cannot fail from the standpoint of safeguarding the interests of domestic companies and protecting existing jobs. Hans-Pet, Chairman of the German Industry Association Keter pointed out that the EU has a population of 500 million, which has created 1/4 of the world’s economic results. This is something that every EU country cannot do alone. The unified currency has played a catalytic role in the economic development of Europe. Seventy per cent of Germany’s exports go to Europe, most of which are in the euro countries, and the domestic industry depends on Europe’s market stability and strong currency. Therefore, Germany should be prepared to give up in the rescue of the euro, and the support of debtor countries should be regarded as an investment behavior. If the views of the German industry on saving the euro as saving the German economy affect the government's decision-making, this is undoubtedly a good news for the rescue of the European debt crisis.

The relationship between China and Europe in the field of trade and investment What is the impact of the European debt crisis on the Chinese economy? What is the impact on the business? Luo Baihui, secretary-general of the International Mould, Hardware and Plastics Industry Suppliers Association, pointed out that as China’s largest trading partner and the most important overseas market in China, the impact of European issues on the Chinese economy cannot be ignored. Whether it is the decision-makers of enterprises or government decision-making departments, they need to make a forward-looking assessment of such influences and prepare them in advance. In this analysis, we will briefly provide some strategic ideas.

The impact of the European debt crisis on China’s economy is determined by the relevance of the economies of China and Europe. In the process of China's participation in economic globalization, the EU is an extremely important economic and trade partner. Among the main targets of China’s foreign trade exports, the top three countries are the EU, the United States, and Japan, which account for more than 60% of China’s total exports. The EU is China’s largest trading partner, the largest export market, the largest source of technology imports, and the second largest import market (see Table 1, Figure 1).

From the data, it is not difficult to see that since China’s accession to the WTO more than a decade ago, the trade volume and trade surplus between China and the EU have maintained a steady upward trend. The proportion of China-EU trade in all foreign trade in China is also steadily rising. It is China’s global presence. The largest trading partner. Among them, China's trade with Germany, the Netherlands, Britain, France, Italy and other countries accounted for nearly 60% of the trade between China and European countries. Therefore, the EU has extremely important significance for the Chinese economy, which has long played an important role in the export-oriented economy.

China not only has a lot of trade with European countries, but also its investment in Europe. However, China’s investment in Europe appears to have been less prominent in the “going out” tide of China’s energy resources and other primary resources in recent years. However, we estimate that as Chinese companies invest in foreign equity investments and financial investments in Europe, Europe will have a more important position in China's foreign investment territory (Table 2, Figure 2).

What impact does the European debt crisis have on the Chinese economy? In our opinion, the impact of the European debt crisis will occur in the following areas: the European economy, European debt, the euro, and other European assets (euro and non-euro assets).

If the European debt crisis further deteriorates, the European economy will inevitably be greatly affected. The consumption confidence and actual consumption of European countries will be greatly reduced. This will directly impact the demand in Europe and affect China through trade channels. In the foregoing analysis, we can see that the consumer market in Europe is extremely important to the Chinese economy. If China’s largest trading partner loses its appetite for consumption, it will undoubtedly cause China’s foreign economy to lose its driving force.

The economic slowdown or recession in Europe and the United States affects China mainly through three channels: trade, commodity prices, and investment confidence. According to Ma Jun, chief economist of Deutsche Bank Asia, each 1% decline in economic growth in Europe and the United States, China's export growth will fall by 6%; and the decline in commodity prices will directly affect China's energy and raw material companies' profits, production and Investment, and the fall in global stock and commodity prices, will again increase the expectations of economic downturn and dampen domestic investor confidence. Although this will have a short-term benefit in relieving China’s inflation, if the European and American economies fall into a recession, the Chinese economy, which has already slowed down under macro-control, will also face greater risks. The EU is China’s largest export market. In 2010, Sino-EU bilateral trade reached US$480 billion. The further deterioration of the European debt crisis will inevitably affect China’s exports and cause a heavy blow to Sino-EU bilateral trade.

In fact, market participants from the trade field stated that although China’s trade figures to Europe in the first half of 2011 were not bad, they could not see the simultaneous growth in container shipments, and there was even a big difference. . Where does the increase in trade figures come from? Some shipping professionals suspect that this may be caused by the high export prices caused by China's export tax rebate mechanism.

If the European debt crisis deteriorates further, it will also have a greater impact on Chinese export companies in exchange rates. Here are two cases: one is the continued weakness of the euro, the relative appreciation of the renminbi exchange rate, which will put pressure on China's exports to Europe, and the appreciation of the exchange rate will eat up the already small export profits. If China continues to reduce its export tax rebate policy in the future, it is estimated that a considerable number of export companies may not be able to do so. For China's many export processing industries under the pressure of industrial restructuring, this is tantamount to worse. The other situation is more extreme: the collapse of the euro will make the euro a piece of paper. Of course, the probability of this situation is relatively small, but it cannot be prevented against this possibility.

In addition, the further deterioration of the European debt crisis will also lead to a substantial devaluation of European debt and Euro assets. So far, European assets held by China have continued to increase. As of the end of June 2011, the balance of China’s national foreign exchange reserves was close to US$3.2 trillion, a significant year-on-year increase of 30.3%. According to market estimates, 60% to 70% of these assets are US dollar assets, and the Yen and Euro assets are about 30%. Among these, the proportion of Euro assets may be between 10% and 20%. If estimated by 15%, the euro assets will be around 480 billion US dollars. If the euro assets depreciate sharply, China’s increase in investment in Europe will meet the cold water of the European debt crisis.

For China's strategy of increasing its holdings of European assets, we must be more vigilant. First of all, Chinese senior officials have reached a consensus on this. On June 24, 2011, Premier Wen Jiabao of the State Council stated during his visit to Hungary that China is willing to purchase a certain amount of Hungarian national debt. Wen Jiabao also made it clear that China has used more new foreign exchange reserves in its purchase of euro assets in 2011. China is a long-term investor in the European sovereign bond market. During his meeting with French President Nicolas Sarkozy, President Tao also stated that China will continue to regard Europe as one of the major investment markets. Obviously, the euro assets held by China will continue to increase.

As the European debt crisis darkens, China once again reiterates its support for the economic stability of the euro area countries and the euro. Europe’s expectation of China’s purchase of European bonds to help resolve the crisis has greatly increased. The European economy, plagued by the European debt crisis, may get a boost from China’s support. However, as domestic scholars have analyzed, it is worthy of vigilance that China’s current inflation problem can be understood as that China is paying for the subprime mortgage crisis in the United States, and that China can no longer be a buyer of the European debt crisis. At present, China's holding of the euro zone's foreign exchange reserves is not much, and the impact of the European debt issue on China is not significant, but if China continues to increase its holdings of euro bonds, the problem is complicated. This is similar to the fact that China used to hold large amounts of US debt in the past and tied China's depreciated financial assets with Europe. The result was sinking together.

China’s purchase of euro assets is part of China’s diversified strategy to promote foreign exchange reserves. In recent years, China's foreign reserves have "escaped" US debt and have become mainstream views. In particular, after the S&P lowered the credit rating of long-term US Treasury bonds, the opposition to China’s holding of US Treasuries rose unprecedentedly. According to the data of the U.S. Foreign Relations Committee, the share of the U.S. dollar in the Chinese government’s foreign exchange assets has declined, from 71% of the total amount in 2005 to 60%. The decline in the proportion of U.S. dollar assets in China’s foreign reserves is a result of China’s strategy of diversifying its foreign exchange reserves.

We estimate that, in recent years, China has diversified its reforms in foreign reserves and a considerable portion of its resources have turned to euro assets. Before the financial crisis, the global economy still enjoys the joy of growth. The euro, as a new international currency, is very strong against the US dollar and is seen as a strong currency that may one day replace the US dollar. These factors have made China naturally turn its attention to Europe in the process of diversification of foreign reserves. After the outbreak of the financial crisis, in part because of the attitude of “bottom-hunting”, China has increased its strategic investment in Europe. Assets range from infrastructure to financial assets, and European multinational bonds are an important one.

However, the European debt crisis allows us to see that compared with the weak US dollar and the US debt that has been lowered in credit rating, the European debt cannot be reassured. Is the euro zone economy, which is strung by the euro, more resilient than the U.S. economy? In the face of financial turmoil, are various European countries’ bonds more valuable than U.S. debt? At present, it looks like the situation is not optimistic.

On the whole, the European debt crisis is an important crisis facing China’s external economy. In our view, it is a more serious crisis than the US debt crisis. It means that European countries (including the European Union and the euro zone) will face long-term The adjustment of the economy includes both the adjustment of the financial systems of various countries and the adjustment of the value of European assets. In the global economic recovery after the financial crisis, Europe is a much more economical place than the United States. In the future, Europe will pay more attention to solving problems in the region and become an "inside Europe." This basic pattern is the policy makers of the Chinese government and Chinese companies must pay close attention to.

The European Debt Crisis Affects China's Exporting Enterprises More and more Recently, it has been learned from export enterprises in Dongguan, Foshan, Shantou and other places that due to the continuous fermentation of the European debt crisis, the reduction in demand in the European region caused orders to decline, resulting in exchange rate fluctuations. Loss of profits. In particular, Europe’s trade protectionism against China has risen again and it has had a greater impact on exports. A number of enterprises interviewed on the one hand are actively responding to the crisis and “seeking and seizing” to cope with the crisis. On the other hand, they also look forward to and appeal to the relevant departments for policy guidance and support. They hope that relevant departments can actively take measures to break down trade barriers.

Although the customs data shows that China’s exports still maintain steady growth, the export situation in the European region has shown signs of deterioration from the pilot signals of export companies’ orders.

Dongguan Outong Knitting Factory undertakes orders from Italian KOINE apparel company. The boss of Han surname revealed that there are only 200,000 orders so far this year, which is one third less than the same period of previous years. “The machine obviously feels that it's not enough to eat, and the workers are doing half-day breaks,” said the Han boss. “We once asked our customers that the other party’s sales in the European market have also declined, and the economic downturn has affected the customer’s willingness and ability to buy. ”

However, what worries South Korea's boss is that even if there are additional orders, he will have to think twice, "in the end or not." First, the customer's payment is obviously slower than in previous years. The account period has been from the past month to the current two or three months. At present, there are still more than 8 million yuan in the factory's payment has not yet been recovered; the second is to avoid risk, the European customer's "broken list "Obviously increased, even if only a single style and color, production costs increase by 30%.

Chenghai, Shantou, Guangdong is an important base for the export of toys from China, and over 50% of toy products from Converse Toys Co., Ltd. are exported to Europe. “Because our company has been working in the European market for many years and has formed a stable cooperative relationship with customers, orders have not been affected for the time being.” Guo Zhuocai, chairman of the plant, said, “But because we use US dollars for European exports, the annual export scale In 40-50 million U.S. dollars, the exchange rate of the U.S. dollar fell from around 6.6 at the beginning of the year to around 6.4 now, and our profits have already suffered a considerable loss."

In order to avoid being further implicated in exchange rate fluctuations, Converse decided to negotiate with foreign investors to adjust the bills in renminbi or the price will automatically adjust with exchange rate fluctuations. Guo Zhuocai said that the toy manufacturing industry needs at least four months of cycle from getting orders to production to final settlement; during the period, the manufacturers are responsible for the impact of exchange rate fluctuations. “Now we are negotiating with foreign investors to include exchange rate fluctuations and raw material inflation factors in the price system so as to share risks.

According to Chen Yanbin, Chairman of Ashgaf Ceramics Co., Ltd., a joint venture between China, France and South Korea in Foshan, it is known who is a naked swimmer in the economic cold wave. The sluggish foreign trade situation will help the industry reshuffle and companies with independent brands will win the opportunity. At the end of last year, Askerf signed agreements with French and South Korean partners to jointly invest millions of dollars in R&D, and hired MPS art and design agencies to carry out advanced design and brand operations. At present, it has occupied a place in the "modern brick" field.

The escalation of protectionism in the European debt crisis has not only meant that European import demand has fallen, but also caused European trade protectionism against China to rise again, which will cause China's exports to face an impact. The reporter learned from Mr. Lan Weibing, director of the China Ceramic Industry Association’s Foshan office, that the European Union recently made an anti-dumping final ruling on ceramic tiles originating in China and will impose a punitive tariff of up to 69.7% on China’s ceramic exports to the EU. 2016.

Mr. Chen Yanbin, chairman of the Foshan Asgar Goff Ceramics Board of Directors, believes that this "abnormally strict" anti-dumping final ruling reveals signs of the rise of European trade protectionism. "The preliminary results of the anti-dumping decision at the beginning of the year led to many EU buyers' wait-and-see. Our factory lost only 30 million Euros in the first half of the year." Chen Yanbin said, "The final ruling results in tariff barriers and China exports to the EU. The competitiveness of ceramics will be greatly reduced, and the export outlook is not optimistic."

Not only the ceramics industry, but also key export industries such as toys, the EU has repeatedly raised barriers to foreign trade, and in particular recently passed a new standard of toy safety known as “the strictest in history” and has made new demands on the mechanical, physical and sanitary properties of toys.

Wen Suihong, editor-in-chief of Chinese and foreign toy makers, previously stated that with the government of the importing country protecting consumers' health and protecting the toy industry in China, it continues to build up toy-based technical trade barriers, increasing the difficulty of toy manufacturing technology and integrating raw materials and various aspects. Higher costs, higher prices cannot keep up with the increase in export costs, and the toy industry has entered a period of high cost and operating difficulties. Some companies stated that after the introduction of new regulations on toy safety, it will increase the cost of enterprises by at least 15%, further weakening the export competitiveness.

Some export companies are concerned that under their own economic downturn, the EU’s trade protectionism may resort to environmental protection, safety, and technical standards. They will make a comeback and will have demonstration effects in other regions. Mr. Blue Guards said that the EU’s anti-dumping ruling has already produced a domino effect, Argentina and Chile have filed anti-dumping laws against Chinese tiles, and Brazil has also announced the increase of tariffs, and trade protectionism has been spreading worldwide.

Yasgoff avoided trade barriers by accelerating the construction of overseas production bases. Chen Yanbin said that Ascot is preparing for the acquisition of a European company, to establish a production base in the European Union and to register trademarks in the European Union. The planned production base will undertake all orders for export to the European Union, accounting for 30% of the company's total output value.

Looking forward to relevant departments’ policy guidance and support to the International Mold and Hardware and Plastic Industry Suppliers Association’s Secretary-General Luo Baihui, the impact of the worsening debt crisis on China’s exports is objective. Because China’s dependence on foreign trade remains high, although the domestic economy is currently undergoing transformation and upgrading, the rate of deterioration of the European debt crisis is sometimes faster than the speed at which China shifts from external demand to domestic demand. The problems that arise are difficult to avoid in a short time.

Luo Baihui pointed out that the impact of the lack of European domestic demand due to the worsening of the European debt crisis on the domestic economy cannot be ignored. China's foreign exports may face great pressure in the coming period of time. The enterprises themselves are hard-pressed in the "cold wave" of exports and look forward to the introduction of relevant departments. Policies guide and support and create a relaxed export environment.

First of all, we must design early warning mechanisms for the crisis, adopt temporary measures such as tax exemptions, and support the association to help companies to get warm. Guo Zhuocai said: "The US debt crisis has not subsided, and the European debt crisis has again invaded. The world's major export markets have been a messy and the relevant departments should not be paralyzed by the still-good export data."

Secondly, in response to the rise of EU trade protectionism, the relevant departments are called upon to take effective measures to curb the trend of global trade protectionism.

Pu Dingxin, president of Foshan Asia Ceramics Holdings Co., Ltd., said that in the face of anti-dumping trade barriers, corporate defense or avoidance results are very different, but the company's own voice is very weak. “We look forward to the Department of Foreign Trade of the Ministry of Commerce being able to make solemn protests and support the collective defense of related companies.”

In addition, in the current situation, export enterprises that have encountered difficulties will have certain policy guidance or financial support. For example, increase the export tax rebate quota, appropriately lower the taxation standards for distressed companies, or provide timely financial assistance to banks through the bank, so as to effectively improve the company's survivability and long-term competitiveness. At the same time, relevant departments and departments can also take the advantage of their own abundant market networks to take the initiative to help companies develop the markets where the export destinations are located, and open up multiple sales channels.