China’s home appliance manufacturers left cursing export orders as costs rise, profits vanish amid yuan rally

Lockdowns and work from home arrangements in the West have increased the demand for home appliances manufactured in China

But a strong yuan is causing profits to decline, with firms also under pressure from soaring metal prices

3-MIN READ3-MIN

Backed by a strong external demand, China’s home appliance exports enjoyed a V-shaped recovery last year, with exports rising by 20.6 per cent year on year in the first 11 months of 2020. Photo: Reuters

Published: 7:45am, 7 Jan 2021Updated: 7:45am, 7 Jan 2021

Faced with a perfect storm of a strong yuan and the rising cost of raw materials, China’s home appliance manufacturers are fearful of booming exports orders caused by the coronavirus as profits decline, leaving some on the verge of bankruptcy.

On one hand, overseas demand for appliances is rising amid lockdowns and work from home arrangements in the West, but on the other, firms are seeing profits vanish as the Chinese yuan continues to rise, meaning they will receive less for the orders which already cost more to produce due to rising copper, aluminium and cold rolled sheet steel prices.

“We are in limbo. At this stage, more orders is not a good but a bad thing,” said Lisa Ye, a sales manager at vacuum cleaner producer Ningbo Chinaclean Household Appliance Manufacture, who described the surge in orders last year as “significant”.

“Our profits are diminishing and are now close to minimum. We may end up losing money in a few months.”

All our profits are gone, and now we are losing money

Cara, sales manager

Companies usually receive payments months after the orders are placed, meaning if the yuan continues to rise against the US dollar, they will receive a smaller return on the price they have already agreed.

“All our profits are gone, and now we are losing money,” said Cara, a sales manager at Jiangmen’s Homemaster Electric Motors and Appliances, which manufactures and exports kitchen blenders. Cara declined to give her surname.

“What’s worse is that as we produce more, there are not enough [shipping] containers for us because the space is limited.