Evgeny Kolesov: "If you place orders in China, save your money"

Has the global economic crisis affected Chinese manufacturers? What are the prospects for the Chinese economy? How will this situation affect businessmen, companies that place orders in China? Evgeny Kolesov, CEO of Optim Consult (Guangzhou), answers these questions.

The current situation in the Chinese economy is planned. To avoid overheating of the economy, the state has outlined a decrease in GDP growth rates. The implementation of the planned strategy has not spared exporters, whose work has become significantly more difficult. And first of all, it affected small market players who do not have sufficient production space and working capital.

The measures taken by the state as part of the implementation of the yuan revaluation policy, to one degree or another, affect the vast majority of Chinese manufacturers. During official meetings with activists of industrial associations and unions of the PRC (Optim Consult is a full member of 12 trade unions of Chinese manufacturers), the management of Optim Consult discussed the issues of revaluation directly with Chinese manufacturers, with those who were directly affected by this measure. The leaders of the Chinese factories agreed that the state intends to "cut" the number of manufacturers in industries by 12-15%.

The first step in this direction is the revaluation of the renminbi, the second is the reduction of the VAT refund rate for exporting products, the third is the improvement of the situation of workers, an increase in the minimum wage. These steps led to a sharp increase in wages and destabilized the work of many manufacturers. Other external factors also complicated the work: inflation was higher than planned, rising prices for electricity and transport sector services. All this led to an increase in costs of producers by 25-30%.

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We should not forget about the banking crisis, which led to a reduction in lending to Chinese manufacturers. All of the above events have become a very difficult test for thousands of Chinese companies.

Therefore, if you answer the main question: how will this affect businessmen placing orders in China, then my main advice is to save money. For August-October 2008, the number of "mysterious disappearances" of Chinese plants exceeded all conceivable limits. Escaping from bankruptcy, many Chinese manufacturers openly spit on long-term partnerships and hide, taking with them hundreds of thousands of client dollars. Now it is especially important to pay maximum attention to the signing of legitimate treaties and the collection of documents on Chinese partners.

As for the prospects, everything is simple here: it rises in price in China, rises in price all over the world. I think many understand that end users will have to pay. Rising prices in the Chinese market in recent years, unfortunately, has become commonplace - those who make regular purchases in the Middle Kingdom know this very well. Today, price increases in China are slightly higher and faster than usual, but there is no reason to panic. Many manufacturers already today find additional sources of competitive advantage, using reserves accumulated by companies in advance. The active participation of Chinese companies at exhibitions once again proves that it is not worth writing off Chinese manufacturers, preferring Vietnam or India.