Under the triple blow of raw material prices, exchange rates, and freight, China's new export orders have continued to decline!

A few days ago, the export orders index in the May PMI (Purchasing Managers' Index) issued by the National Bureau of Statistics and the China Federation of Logistics and Purchasing fell below the line of prosperity and decline, down 2.1 percentage points to 48.3%! The last time was in February this year, which was mainly affected by the Spring Festival.

As a leading index, PMI indicates that the export volume will likely weaken in the future. The decline in new export orders also contributed to the overall decline in new orders for the second consecutive month and the decline in PMI employment in May.

Main pressure: rising raw material exchange rate and freight costs
According to the survey, new orders from large foreign trade factories are still increasing, while small foreign trade factories have dropped significantly.

The cost of raw materials, exchange rates, and ocean freight are the three big mountains that it bears, which inhibits companies from taking orders.

Judging from the May PMI data, the purchase price of raw materials continued to rise by 5.9 points from the previous month, reaching a new high since 2011. The increase in purchase prices is greater than the ex-factory price, corresponding to the compression of profit margins, and the pressure on the cost side of enterprises continues to rise.

So the current main contradiction is not insufficient demand. Under the epidemic situation, Southeast Asia is in emergency, the industrial chain returns to China, and the "substitution effect" of Chinese production is becoming more and more obvious. Based on the advantages of the industrial chain, there is no shortage of orders.

But the main contradiction is the large increase and various cost pressures. Including the continuous appreciation of the exchange rate and the continuous increase in ocean freight, companies are not making money, so they dare not take orders, especially small and medium-sized enterprises.

New export orders fell month-on-month
New export orders in May fell sharply from the previous month, mainly due to the recovery of economic activities in the United States and Europe, the convergence of the supply and demand gap, and the superimposed disturbance of the appreciation of the renminbi.

The high growth of China's exports after the epidemic has benefited from the supply of anti-epidemic materials, the widening gap in overseas supply and demand, and the replacement of production capacity. But it is difficult to sustain, the reasons are:
The global epidemic has resumed, and the demand for epidemic prevention materials x has fallen sharply.

European and American economies continue to recover, and the gap between supply and demand has narrowed.

The production capacity of emerging economies has recovered, and the effect of capacity substitution has faded.

The overseas epidemic has gradually eased, and has gradually shifted from global spread to local economies. The number of newly confirmed cases worldwide has dropped from a maximum of 900,000 cases to the current 390,000 cases. India and Latin America are more serious.

Superimposed large-scale vaccination in developed countries. The United States, the United Kingdom, and Germany accounted for 40.7%, 37.9%, and 17.1% of the fully vaccinated populations, and developed economies such as Europe and the United States resumed production in an orderly manner.

U.S. supply and demand gap is gradually narrowing
The gap between supply and demand in the United States has gradually narrowed, and durable goods inventories have continued to rise. Benefiting from Biden's $1.9 trillion stimulus plan, demand has accelerated to recover, and U.S. commodity consumption hit a record high;

The US Markit manufacturing PMI is 61.5%. The U.S. capacity utilization rate and industrial output index on the supply side have returned to 80% before the epidemic. U.S. consumer durables began to restock in September 2020 and have returned to the 2019 inventory level.

In terms of specific commodities, China's exports of furniture, automobiles, and home appliances, which have a higher growth rate, have continued to increase in US inventories.

Production capacity recovery in emerging economies accelerates
The recovery of production capacity in emerging economies is accelerating. Currently, South Korea's capacity utilization rate has returned to the level before the epidemic. South Korea's exports on the first 20th of May were 53.3% year-on-year.

The state increases support for small and micro enterprises
For small companies, the difference between ex-factory prices and purchase prices continues to expand, while small companies are concentrated in the downstream, the industry is scattered, and the cost transmission ability is poor, which is the most obvious squeeze on profits.

In addition, small businesses account for a relatively high proportion of exports, and the decline in new export orders this month has put pressure on the operation of small businesses. Moreover, the foundation for the recovery of small businesses after the epidemic is not solid.

The executive meeting of the State Council on May 26 deployed to further support the relief and development of small and micro enterprises and individual industrial and commercial households:

Implement measures to reduce taxes and fees. Intensify support for inclusive finance for small and micro enterprises and individual industrial and commercial households, guide the expansion of credit loans, first loans, medium and long-term loans, and renewal without principal, and promote loans on-demand.

The study will shorten the acceptance period of commercial bills from one year to six months to reduce the pressure on enterprises to occupy the funds.

Support large enterprises to build a supply-demand docking platform for key industries, use market-oriented methods to guide the upstream and downstream supply chains to stabilize the supply of raw materials and coordinate production and sales to ensure supply and stable prices.

Crack down on hoarding and price-raising behaviors. Support localities to provide stable employment subsidies to small and micro enterprises and individual industrial and commercial households in accordance with regulations. Urge and guide the platform to reduce excessive fees, commissions, and the proportion of new merchant commissions and referral fees.