The risk of exporting to these three countries has increased sharply recently!

According to reports, after 2020 has passed halfway, the impact of the novel coronavirus epidemic on foreign trade companies still exists. Due to the uncontrollable factors of the epidemic and the speed of its spread, new peaks of the epidemic have also appeared in many countries. The United States, Brazil, and India rank among the top three in terms of number of confirmed cases. Among them, the United States exceeds 5.08 million, Brazil exceeds 3.05 million, and India exceeds 2.21 million. About half of the global cases exceeding 20 million are concentrated in these three countries. It is recommended that export companies pay close attention to the epidemic situation in various countries and the adjustment of trade-related policies, strengthen export risk management, focus on cooperation partners, focus on investigating business background, and pay attention to the risk control of collection and delivery to reduce import and export trade risks.


United States

Epidemic Express

According to real-time data from Johns Hopkins University in the United States, as of 7:35 a.m. on August 11, Beijing time, there were 5,085,021 confirmed cases of new coronary pneumonia in the United States, and a total of 163,370 deaths. Compared with the previous day, there were 39,291 new confirmed cases of new coronary pneumonia and 431 new deaths in the United States within 24 hours.

Dr. Fauci, a top American infectious disease expert, believes that the future development of the epidemic is very difficult to predict. Ohio, Kentucky, Tennessee, and Indiana are all states where the percentage of positive tests is rising.


Risk inventory

The recent decline in the number of corporate bankruptcies: Don’t be fooled by the illusion: The crisis triggered by the epidemic interrupted the longest expansion cycle of the US economy since 1854 (10 years and 8 months). In 2019, the number of US corporate bankruptcies appeared since 2009 The first annual increase. The slowdown in manufacturing-led economic activity and the increasing number of bankruptcies in fragile industries such as retail and U.S. shale gas have contributed to this trend.

According to data from the American Bankruptcy Association (ABI), the number of companies that filed for bankruptcy under Chapter 11 procedures of the US Bankruptcy Law increased by 18%, 26%, and 48%, respectively, in these three months. This growth trend reflects the early effects of the epidemic. During this period, companies such as Hertz, J.C. Penney, and Whiting Petroleum were forced to enter the restructuring process. According to Chapter 11 of the US "Bankruptcy Law", the increase in the number of companies applying for bankruptcy protection may also be related to the implementation of the "Small Business Restructuring Act" on February 19, 2019. The law can make it easier for small businesses in difficulty to obtain bankruptcy protection. Although it is too early to assess the impact of the law on corporate bankruptcy, these changes should encourage more companies to seek protection under Chapter 11 of the US Bankruptcy Law. With the recovery of economic activity in the United States, increasing pressure on corporate payment deadlines, and expiration of support measures, it is expected that the number of US corporate bankruptcies will rebound in the second half of 2020.

Highly indebted companies face bankruptcy and "zombification" threats: Since the 2008 global financial crisis, the debt of US non-financial companies has accumulated very quickly, and by the end of 2019, it accounted for almost 47% of their gross domestic product (GDP). In the coming months, the upward trend of US corporate bankruptcies seems to be more inevitable. In response to the epidemic, US companies have worked hard to obtain sufficient liquidity to continuously escalate debt accumulation. At the end of the first quarter of 2020, their share of US GDP hit a record high of 48.7%. After the 2008-2009 recession, the historically low interest rates implemented by the Federal Reserve contributed to the accumulation of debt and increased financial vulnerability. As income and cash flow are impacted, companies that hold short-term debt will face a huge risk of bankruptcy.

In this case, the accumulation of debt has exacerbated people's concerns about the increase in the number of "zombie" companies. These "zombie" companies are heavily indebted and unsustainable. They often use low-interest loans to make ends meet. Coface's calculation results using US listed companies as a sample show that the proportion of "zombie" companies has indeed increased in recent years, accounting for more than 6% of the number of US listed companies in 2019. Among American SMEs, the proportion of "zombie" companies may be even greater.


Risk warnings and suggestions

Relevant research data shows that "zombie" companies with lower productivity tend to crowd out the investment and employment of companies with higher productivity. Therefore, the "zombification" of companies will be a key risk of US surveillance in the coming months. It is recommended that enterprises of all sizes should pay more attention to their partners, investigate their backgrounds, and pay close attention to the trend of the US epidemic in order to reduce risks in import and export trade.


Brazil

Epidemic Express

According to the latest data released by the Brazilian Ministry of Health on the evening of August 10, local time, there were 22,048 new confirmed cases of new coronary pneumonia in the country in a single day, and a total of 3057470 confirmed cases; 703 new deaths and 101,752 deaths. Currently, Brazil still ranks second in the world with confirmed cases and deaths, second only to the United States. According to Brazilian media reports, as of now, in addition to Brazilian President Bolsonaro’s diagnosis, five cabinet ministers and nine governors of the country have contracted the new crown pneumonia. Bolsonaro tested positive for the third virus this week.

Brazil’s National Institute of Geography and Statistics recently released the "Corporate Pulse Survey: The Business Impact of the New Coronavirus", which shows that since the new crown epidemic, Brazil has had 716,000 companies closed down, which is very important for trade (39.4%) and service (37%) industries. The impact is particularly severe. According to statistics, among the companies that will not open their doors again after the epidemic, the vast majority (99.8%) are small and micro enterprises. According to data from the Brazilian Small and Micro Enterprise Service Agency, an average of 10% of small and micro enterprises in China close down each year, which is equivalent to about 600,000. As of mid-June in 2020, more than 700,000 companies have closed down.


Risk inventory

Future expectations are not optimistic, and export risk management needs to be strengthened: Brazil has become the epicenter of the outbreak in Latin America, and the epidemic data has not yet peaked. Under the background of superimposed commodity prices, the future economic and domestic political situation in Brazil is not optimistic.

Affected by the unfavorable macroeconomic expectations, the Brazilian National Federation of Industry (CNI) announced the Industrial Entrepreneur Confidence Index on May 28 and pointed out that in May this year, Brazilian industrial entrepreneurs generally lost confidence in the fields of investment, employment and production. In the 29 industrial sectors, the confidence index of all sectors is below 50 points, which means that entrepreneurs generally lose confidence in the market. The confidence index not only measures people’s expectations of Brazil’s economic development and current conditions, but also reflects the worsening of the economic crisis triggered by the epidemic. The International Monetary Fund also announced in its "World Economic Outlook" update report released on June 24 that Brazil will experience its biggest economic recession in 120 years this year. Brazil’s long-standing single and fragile industrial structure, high government debt, and sharp social contradictions have been fully exposed under the impact of the epidemic, and will be transmitted to the vast number of small and medium-sized enterprises through various channels, turning them into steep foreign exchange risks. Rise. Judging from the current damageable cases, most of the reported damages are affected by the Brazilian epidemic and the current exchange rate depreciation, resulting in the buyer or the bank being unable to pay on time, or the buyer being unwilling to bear the loss of exchange rate changes and defaulting on the payment.


Risk warnings and suggestions

It is recommended that export companies pay close attention to the Brazilian epidemic and trade-related policy adjustments, and strengthen export risk management. For old customers, apart from understanding the buyer’s degree of impact by the epidemic, the latest business situation and the buyer’s purchase of foreign exchange, reasonable arrangements should be made to ship out and strengthen the tracking of foreign exchange collection; for new customers, you can understand the buyer’s credit status through credit investigations, etc., and choose customers carefully And settlement methods.


India

Epidemic Express

At present, India, as the world's third most dangerous country, has accumulated more than 2.2 million confirmed diagnoses and accumulated more than 40,000 deaths. People believe that, as India continues to develop, it is just around the corner to surpass second-place Brazil.


Inventory of recent extreme trade measures in India

India announced the ban on 59 Chinese apps (Apps) including WeChat: In the early morning of June 30, the Indian government announced the ban on WeChat, TikTok, Meitu, and other media in the "India Express", "Hindustan Times", and "India Today". 59 Chinese apps such as Baidu Maps are used in India. These 59 Chinese apps will be prohibited from being used on mobile and non-mobile platforms on the grounds that “the activities of these apps are harmful to India’s sovereignty and integrity, national defense, national security and public order. ".

India pushes up trade barriers to China: On June 26, the Bureau of Indian Standards (Bureau of Indian Standards) set stricter standards for at least 370 products to ensure that products that can be produced in India are not imported. These products include chemicals, steel, electronics, heavy machinery, furniture, paper, industrial machinery, rubber products, glass, metal products, medicine, fertilizers, and plastic toys. The Indian side is also currently discussing raising import tariffs on Chinese products such as furniture, air-conditioning compressors and auto parts to assist the government in promoting the implementation of local manufacturing policies.

Statistics show that the localization level of air conditioners in the Indian market is 50%, and the localization level of products such as LED TVs, smart phones and laptops is 15% or less. Motors and telecommunications equipment have the highest import share from China, reaching 29.3%.

Mandatory marking of the country of origin to prevent Indian consumers from buying Chinese goods: The Indian government ordered on June 23 that the Indian public procurement website "Governmente Marketplace" (Governmente Marketplace, GeM) products must be marked with the country of origin. Subsequently, the Hindustan Times reported that the Indian government is considering requiring all retailers and e-marketplaces to indicate their country of origin. The Indian Ministry of Commerce and Industry recently held a stakeholder meeting to discuss how to force goods to indicate their country of origin. If consumers want to boycott Chinese goods, this policy will help consumers avoid buying Chinese goods.

India's inspection of Chinese goods has increased sharply, and the risk of customs clearance has increased significantly: On June 23, the Chennai Ports Customs Brokers Association (CCBA) of India issued an internal customs clearance delay notice to all agent members, requesting all goods from China Customs clearance work has been suspended, and the goods that have been cleared need to be re-inspected and spread to all Indian ports and ports. The release of the goods needs to be approved by the association after further contact with the customs officers, so the customs clearance of Chinese goods will be delayed. But it is worth noting that the official notice has not been released yet.


Risk warnings and suggestions

The Indian economy has been hit hard by the epidemic: The IMF (International Monetary Fund) recently predicted that among the major economies, India will be the country with the largest decline in economic growth this year. The various blockade policies implemented to prevent and control the epidemic itself have a negative impact on the economy, and the situation is even more serious for India. After India adopted strict prevention and control measures, the income of nearly 84% of Indian households has fallen. Without additional assistance, almost one-third of families will not survive for more than a week. Although in late March, the Ministry of Labor and Employment had asked not to use the current situation as an excuse to lay off employees, the effect was not good. The unemployment rate exceeded 27% at the beginning of May, which was nearly four times higher than the level in January. The analysis found that the epidemic has reduced the income of rural households in India by about 88%, and that of urban households by 75%.

Facts have proved that the Indian economy has been hit hard by the epidemic. The Indian government has issued three rounds of economic stimulus plans with a total of nearly 21 trillion rupees, or more than 26 billion US dollars. However, compared with the actual scale of India, it cannot exert effective influence. force. What is more worrying is that India has now become the world's fourth most severely affected country. In view of factors such as medical conditions and population density, once a large-scale outbreak occurs in India, the severity of the epidemic will be worse than that of the United States.

India continues to set trade barriers against Chinese products: According to official data released by India, India’s imports from China mainly include watches, electrical appliances, furniture, toys, clocks, music equipment, sports goods, mattresses, plastic products, steel products, etc. The proportion of Chinese imports has reached 14% of India's total imports. From April 2019 to February 2020, India's total imports from China have reached 15.5 billion US dollars.

The outbreak of the epidemic has led to a severe recession in India's economy. Since February this year, India has substantially increased import tariffs and introduced policies to restrict imports. Announcing the increase in import tariffs on electronic products, toys, photovoltaic products and furniture, aimed at promoting the recovery of domestic manufacturing. So far in 2020, India has applied for domestic enterprises to apply for aniline, fluororubber, PVC decorative film, copper and copper alloy rolled materials, ciprofloxacin hydrochloride, natural mica pearlescent industrial pigments, Investigations have been initiated on products such as carbon black for rubber, and rough statistics have taken at least 7 investigations on Chinese products. It is also reported that India has drafted new regulations earlier, suggesting to strengthen the scrutiny of new foreign securities investors (FPI) from the Chinese market; reports claim that this is India’s latest move to control the inflow of foreign capital during the epidemic. In fact, as early as a few weeks ago, India announced that it would review all foreign direct investment (FDI) from neighboring countries, which means that the freedom of investment in neighboring countries of India is restricted, but European and American countries are outside the scope of its restrictions. Inside.

The risk of my country's exports to India has risen sharply: Beware of the risk of trade frictions. India has always been anxious about products "swept by" from China after liberalizing market access. Almost ten years ago, India frequently adopted anti-dumping measures to prevent Chinese products from entering India. In 2019, India's number of anti-dumping investigations against China was second only to the United States, ranking second in the world. Recently, India has begun to attack China's export products frequently. The Hindustan Times reported that India believes that at least 100 Chinese products have been identified as being dumped, and India will launch anti-dumping actions against them. It is expected that India’s anti-dumping investigations on Chinese goods will become more frequent, further reducing the export space of Chinese products to India.

Public information shows that in the past two weeks, Chinese imports of goods have been blocked in ports including Mumbai and Chennai in India, causing many containers to pile up at the ports. In addition, due to the recent strict inspection of Chinese goods by Indian customs, the workload of customs staff has increased greatly, and it has also affected the customs clearance of imported goods in other countries. In view of this, we remind foreign trade companies that have recently traded with India, especially goods exported to India, to pay attention to the risk of collection and delivery, and be alert to blocked customs clearance at the destination port, no one at the destination port, buyer abandonment, and rejection Non-payment and other issues. In addition, in view of the sudden increase in risks in the short term, it is recommended that the Chinese side make corresponding preparations in advance. It is recommended to postpone the shipment if the shipment has not been delivered to avoid unnecessary losses. If the shipment has not yet arrived, it should also maintain smooth contact with the customs clearance agent in advance. If necessary, it is recommended to adjust the unloading port in time.