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Exporters save themselves in the financial downturn

By Yu Hongyan (chinadaily.com.cn)
Updated: 2008-10-31 15:24

With the developed world grinding through the financial crisis, export-oriented manufacturers are feeling the cold from the global slowdown. But despite the downward trend, exports in Yuyao, a city in eastern China's Zhejiang province, have recorded a 17.32 percent increase during the same period, thanks to the local government's effective countermeasures.

In response to the tough economic environment, the government of Yuyao carried out a series of favorable policies for small- and medium-sized enterprises (SMEs), and set up a fund of 300 million yuan ($43.84 million) as a backup.

To cope with the difficult situation, the government has guided SMEs to switch their operating strategy, and also suggests countermeasures drawing from the success of some companies in Yuyao, which may free other SMEs from their economic troubles.

The government's first act was to call the SMEs to develop value-added products, and companies devoted to research and development will get subsidies from a specialized fund set by the local authority.

Confronting rises in labor costs, raw material and an appreciating yuan, the government suggests companies to negotiate with their clients frankly with mutual trust and understanding to get a better price.

In case of losses due to the yuan appreciation, exporting companies in Yuyao have also changed their way of giving quotes. Offers are made through favorable currencies like the euro and yuan, and their valid period has been shortened to avoid losses in exchange fluctuation. Besides that, there will be clauses in the contract for both parties' liabilities, or a medium price, should the exchange rate alter.

As demand from the US and Europe withered in the wake of the crisis, trading companies in Yuyao began to develop markets like Russia, Latin America and Africa, which are less affected by the financial turmoil. And gradually the domestic market began to contribute to their sales.

For those with sound capital capacity, it looks better to establish outlets abroad to meet end users directly, which would help to evade importing quotations and tariffs.

Taking advantages of the upward yuan and promotive policies on importation, companies are encouraged to import equipment and scarce materials from abroad.

In spite of measures to optimize the market situation, companies in Yuyao also strive to enhance their competitiveness through interior management to reduce operating costs and labor costs.

Unlike their previous attitude toward international standards, which often turn down Chinese exporters, trading companies here are organized to make out products in line with industry standards, making it easier to avoid trade barriers.

In a bid to promote their brands, entrepreneurs in Yuao are generous in advertising investment, and they regard expositions and after sales service as effective ways to maximize brand popularity. More over, they are beginning to stress the unique feature of their brand among products of the same kind.

Another thing to be noticed is that aside from simply raising funds from loans, entrepreneurs in Yuyao have already set their sights on the oversea market for fund rasing. Ningbo Great Leisure Products Co Ltd was listed in France in September raising 5 million euros ($6.47 million) and Ningbo Jiefeng Household Necessities Co Ltd., went listed in Hong Kong last month, becoming the second Hong Kong listed company in Yuyao.

With an active response to the tough situation and flexible counter acts, exporters in Yuyao sold out $3.28 billion goods during the first three quarters, up 17.32 percent year-on-year.