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Get Prepared for the Coming Chill
The imbalance of international payment has been the sword of Damocles over the head of world economy. Once America sneezes, the world catches a cold.
In the past decades, China was seen as the world factory. Products made in China are spread to every corner of this planet. However, China's export got expanded under unhealthy conditions: cheap labor force, low costs, electricity and energy subsidy, a lower RMB exchange rate, 0 cost for pollution, etc. China has traded its products at extremely low prices for US dollars whose value has been falling. The foreign exchange was later invested into American treasury bonds, agency bonds, and even some secondary bonds. Now, China, holding an approximately $1.8 trillion foreign exchange reserve, finds itself deeply stuck in this American economic crisis.
Under this circumstance, Chinese foreign trade companies get half the number of orders from their overseas clients. Even if they can get the same amount of overseas orders, SMEs could hardly gain profits out of the business. This shrink of profit mainly owes to the leaping costs of raw materials and labor force along with the appreciating RMB. "Even when there are orders and clients, we can see no profit." is what some Chinese SME runners feel.
While small and medium sized foreign trade companies are undergoing the crisis, B2B business, heavily relying on them, is on the same boat. The number of disappearing SMEs means B2B is losing business.
In the mean time, this financial crisis has brought about pervasive introspectiveness. Like in a tsunami, only solid buildings have the chance to survive, in this economic crisis, only really powerful companies could survive. However, brand name establishment is the Achilles' heel for most Chinese SMEs. 70% of Alibaba's clients have been so-called OEM foreign trade companies from the Yangtze River Delta. This OEM mold is pernicious and risky for the trading companies themselves and for B2B business.
For existing SME owners, at present, they should cautious about the seesaw exchange rates and plan for brand name establishment, which is more profitable and far-reaching. Moreover, high-tech business would stand out in this economic tsunami, for innovation is vital to develop low-cost products which would be in great need.
For B2B runners, challenges come along with opportunities. B2B would have a key role to play in promoting consuming and creating jobs. Hopefully, B2B will help SMEs survive the tough winter to see a ray of spring sunshine.
The downturn in European and American markets will bring a change to the marketing mold of B2B. China's B2B leader, Alibaba, has begun to shift more attention to import market, and has raised an "export to China" plan for SMEs in foreign countries. What's more, Alibaba will open new markets in Asian countries and regions, such as Japan, India, Taiwan, etc. Alibaba's CEO Weizhe said, "Import business could help reduce the loss in export business. Besides, export business of Alibaba would keep growing, though at a lower speed."
Doubtless, e-commerce has done an impressive job in providing SMEs business opportunities. Both SMEs and B2B businesses should keep an eye on the erratic market and get full equipped if they want to get through the winter safe and sound, for chance always favors the prepared mind.
About the Author Jasonlaochen: e-commerce researcher focus on China's b2b (Business-to-business) market.
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