Chinese Shoemaker Illustrates Potential Limits of Revaluation
Will a revaluation of the Chinese currency help reduce America's bloated trade deficit with China? A close look at one shoemaker's cost and pricing pressures show why that's probably wishful thinking.
The world's biggest sneaker maker with a 17% global market share, Hong Kong-listed Yue Yuen (Industrial) Holdings should be just the kind of company vulnerable to the cost increases that an appreciation of the yuan would bring about. It manufactures primarily in China, and produces a labor-intensive product.
Yue Yuen's management estimates, however, that a 5% increase in the yuan's value versus the U.S. dollar, roughly in line with what many analysts expect could happen this year, would amount to a mere 1% rise in the company's total costs, which totaled US$2 billion for the 2004 fiscal year. "It's just a little bit," says Terry Ip , Yue Yuen's head of investor relations.
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Revaluation cheerleaders from developed countries argue that the yuan, currently pegged at an exchange rate of 8.28 to the dollar, is undervalued, giving Chinese exporters an unfair trade advantage. If China were to let the yuan's value rise, so the theory goes, its exporters would see their production costs grow and raise prices, blunting some of their competitive edge in overseas markets.
Although China resisted heightened pressures to revalue the yuan late last year, many economists still expect China to do so some time this year, a move they foresee leading to a 3% to 7% rise in the currency's value. China rekindled speculation over its yuan policy last week, when it announced that it would discuss its currency at this week's Group of Seven meeting of finance chiefs.
But here's the catch: for many Chinese exporters, costs paid in Chinese currency typically make up only a small portion of their total costs. Most import about half of their raw materials. A stronger yuan actually makes it less expensive for them to buy these materials, offsetting the higher costs of domestic materials, says J.P. Morgan economist Grace Ng.
Even China's textile industry, where profit margins are a skeletal 3% to 5%, may not be significantly affected by a currency revaluation, since labor and overhead costs typically make up just 30% of textile-production costs. If authorities were to allow the yuan to appreciate by 7% -- a rate at the high end of analysts' expectations -- this could easily be offset by a 2% rise in the apparel prices a factory charges, says Ms. Ng.
What's more, the end of global textile quotas at the end of 2004 is likely to lower administrative costs and increase volume growth for China's textile exporters, mitigating the negative impact of a possible currency appreciation, she says.
At Yue Yuen, only 16% to 20% of production costs are in yuan, largely in the form of labor and utilities, says the company, which is based in Dongguan city, southern China's manufacturing powerhouse. Some 63% of its costs of goods sold are raw-materials costs, which are largely booked in U.S. dollars, even when sourced locally, it says.
A currency revaluation would undoubtedly have a negative impact on Yue Yuen's earnings, "but the impact should not be very significant," says Eddie Lau of ABN Amro in Hong Kong.
Yue Yuen's case also demonstrates why China's low-cost manufacturers wouldn't likely raise prices significantly in the wake of a yuan revaluation.
More than a week ago, Yue Yuen, formerly an investors' darling, reported a year-to-year decline in net profit, its first in 12 years, in part because of a sharp increase in oil prices. The oil-price increase raised the costs of the petrochemical derivatives Yue Yuen uses in making shoe soles by 50% to 60% during the past year. Yue Yuen's net profit fell 1.6% to US$303 million, or 18 cents per share, for the year ending Sept. 30. The net profit figure was 4% less than analysts' expectations.
Despite the cost increases, the company raised average selling prices by a fraction, "almost nothing," says Mr. Ip.
Analysts were confounded. With major clients such as Nike and Adidas-Salomon, a market share that has consistently grown over the years and competitors which are, at best, just a quarter of its size, Yue Yuen had been considered one of the Chinese manufacturers best-positioned to pass on any cost increases.
Its inability to shift even a third of its rise in raw-materials costs to clients is a reminder that companies with a heavy China manufacturing base "basically have no pricing power," says Merrill Lynch analyst Jeanine Angell.
Following Yue Yuen's earnings announcement, Ms. Angell downgraded the company's earnings estimates by 15% for 2005 and 2006, and slapped a "sell" rating on the company. She said in a research report that Yue Yuen's management was, in her view, "poorly executing in their attempt to push through prices." Ms. Angell said that if manufacturers had little luck transferring some of their increased raw-material costs to customers, pushing through higher utility and labor costs resulting from a yuan appreciation would be "really tough."
Yue Yuen says it has raised average selling prices between 2% and 3% during the first quarter of this year, but is unsure it can transfer additional costs to clients.
从制鞋企业看人民币升值影响之局限
一些人认为，人民币升值有助于美国减少对华贸易赤字。但是，从一家制鞋企业的成本和定价情况中，你会发现，这种想法或许只是一厢情愿。
占有全球17%运动鞋市场的世界最大运动鞋制造商、香港上市企业裕元集团(Yue Yuen (Industrial) Holdings)的例子应该能充分体现人民币升值给该公司带来的明显成本压力。该公司的鞋厂基本都设在中国大陆，属于典型的劳动密集型企业。
不过，裕元集团管理层估计，如果人民币兑美元汇率像许多分析师预计的那样升值5%，那么他们的总成本将只会增加1%。该公司2004年的成本总额是20亿美元。裕元集团投资者关系部主管叶铭忠(Terry Ip)说，如按去年的情况计算，增加的成本很少。
呼吁人民币升值的发达国家人士认为，目前人民币按照8.28元兑1美元的比率与美元挂钩实际上使人民币的价值被低估了，这让中国出口企业获得了不公平的贸易优势。按照他们的理论，如果中国让人民币升值，那么其出口产品的价格和成本势必上升，在海外市场的竞争力就会减弱。
虽然中国去年末顶住了要求人民币升值的各种压力，但许多经济学家预计，中国会在今年某个时候让人民币升值，他们还估计升值幅度会在3%-7%之间。上周中国宣布，在这周即将举行的七大工业国(G7)财长会议上会讨论到人民币问题，一时间，外界对中国汇率政策动向重又议论纷纷。
但关键是，对许多中国出口企业而言，以人民币支付的成本通常在其总成本中只占很小比例。多数厂商大约有一半的原材料来自进口。JP摩根(J.P. Morgan)经济学家吴向红(Grace Ng)说，人民币升值实际上可使他们的原材料成本相对下降，从而抵消其国内原材料成本的上涨。
实际上，即使是利润率只有3%-5%的中国纺织品行业也不会因人民币升值受到显著影响，该行业的劳动力成本和企业一般性管理费用也只占其总成本的30%。吴向红说，即使人民币升值7%（这是目前各种预期升幅中最高的），服装价格的相应升幅也只有2%。
而且，2004年年底全球纺织品配额制取消后，中国纺织品出口企业的管理成本将有所降低，而出口增幅则会加大，这也会降低货币升值对他们产品价格的影响。
以总部设在华南制造业基地──东莞的裕元集团为例。据该公司透露，其产品成本中有16%-20%以人民币支付，主要是人员工资和公用事业收费。其制成品成本价格中，原材料成本占到63%，这些原材料大多以美元支付，即使是在当地采购也是如此。
因此，荷兰银行(ABN Amro)的Eddie Lau说，如果人民币升值，无疑将对裕元集团的利润产生负面影响，但是影响不会很明显。
裕元集团的例子说明，在人民币升值之后，中国的低成本制造商不大可能大幅提高产品出口价格。
前一周，一向很受股市投资者追捧的裕元集团宣布2004财年利润出现12年来的首次下降，原因之一是油价大幅上涨。去年，裕元集团制作鞋底使用的石化衍生材料的成本因石油涨价而剧增50%-60%。在截至2004年9月30日的一年时间里，裕元集团的净利润下降了1.6%，为3.03亿美元（合每股18美分），较分析师的预期低了4%。
叶铭忠说，虽然成本明显上升，但该公司的产品平均售价涨得很少，几乎可以忽略不计。
分析师们对此颇为迷惑不解。裕元拥有耐克(Nike)和阿迪达斯(Adidas)这样的大客户，市场占有率一直持续上升，其最强竞争对手的生产规模也只不过它的四分之一。这样一家向来被认为最有能力将成本增加转嫁给消费者的中国制造商，何以其产品价格的涨幅竟不及成本涨幅的三分之一！
美林(Merrill Lynch)分析师安吉尔(Jeanine Angell)说，裕元的这种无能为力提醒人们，以大陆为主要生产基地的公司实际上在定价上并没有多少主动性。
安吉尔在裕元集团宣布业绩后将该公司2005、2006年的利润预期下调了15%，并将其股票评级定为卖出。她在给客户的研究报告中说，在她看来，裕元集团管理层在产品定价问题上难有多少作为。
安吉尔表示，如果制造商不能将原材料成本上升的影响转移到客户头上，那他们要想转嫁人民币升值带来的公用事业收费和劳动力成本的增加也是件“相当困难的事”。
裕元集团透露，今年一季度其产品平均售价上升了2%-3%，公司同时表示，难以确定能否将更多的额外成本加到客户头上。
