CM magazine May 2019

INTERNATIONAL
TRADE
Monthly round-up of the latest stories
in global trade by Andrea Kirkby.
CHINA WATCH: OOPS
MOST media reports have
concentrated on the Trump/
China trade skirmishes. But
there’s much more interesting news
from China – stalling consumer
spending.
Car sales to the domestic market
fell nearly 16 percent in January 2019.
That's the seventh month of declining
car sales, and an acceleration from a
six percent fall in the whole of 2018.
(That, in turn, was the first annual
fall in car sales for nearly 20 years.)
It's not just cars, either. Apple reports
poor iPhone sales, for instance – and
CEO Tim Cooke says the speed of the
deceleration took them by surprise.
Is this the Chinese hard landing?
Actually, it might not be. Underneath
the headline economic figures, China
has made major structural changes.
The shadow banking sector has
been cut sharply, and the economy
has been diversified, with services
taking an increased share. Domestic
consumption is also taking a larger
share of the economy – so China is
less dependent on exports. So, though
the short-term looks tough, in the
long-term China is probably better off
than it was a couple of years ago.
You'll still need to mind your eye,
though. The cut in shadow banking
loans and peer-to-peer lending will
hurt private companies which tend
to borrow in these sectors rather
than from traditional banks. Watch
your customers carefully for signs
of financial stress – there could be
bumpy times ahead.
BUT ONE THING I DO KNOW
BRITAIN has now got 'new trade deals’ with Israel, the Faroe Islands, Fiji and Papua New
Guinea. Chile, the Seychelles, Zimbabwe and Madagascar also figure on the list, and we do at
least have a continuity agreement with Switzerland.
As for Japan, South Korea, and Turkey – much more important markets for British export –
there’s no word on what our arrangements will be after 30 October, or whenever.
So that's unimpressive. But what's even more unimpressive is that these marvellous new
trade deals, with all the advantages that voters were told would flow from exiting the EU and
being able to name our own terms, are in fact simply roll-overs of the deals we already had.
Whatever your view on the UK's relationship with the EU, what seems very clear is that
British exporters are being sold down the river. Perhaps it's time to take a higher public profile
and demand the needs of companies who fuel the British economy are taken into account.
BASED IN TELFORD,
SUCCESSFUL
EVERYWHERE
OIL mist filter manufacturer Filtermist is one
of those companies that really understands
export; 92 percent of its total sales are
exported to 60 countries including the US, as
well as across Europe and the Far East.
Filtermist prefers to work through
distributors. Where the company puts
the work in is in identifying the right
markets in the first place, and then building
relationships. For instance, Filtermist
headed to IMTEX, the Indian Metal-Cutting
Tool Exhibition, to push its products in a
market where environmental performance
is currently a top issue. But it's fair to point
out that Filtermist isn't an overnight success.
One US distributor has been on board for 40
years. Obviously, you need to be in this game
for the long term.
EULER HERMES
OPENS ITS VAULTS
EULER Hermes collects a huge amount
of data in order to carry out its economic
analysis. Now, it's made a lot of it available to
everyone on the Open Data Portal (opendata.
eulerhermes.com).
You can look at the data on the web or use
an API to build more complex models. I was
quite intrigued by some of the information
available; for instance, that Romanian
exporters to France have a much worse
payment experience than others. Or that
the sector with the worst payment records
in France are automotive (which you might
have expected) and bakers' shops (which
you might not). It's definitely a page worth
bookmarking – though your queries will
probably be less frivolous than mine.
Vietnam export value higher than GDP
ONE interesting fact that popped up on my
radar this month is that Vietnam's export
value is actually higher than its GDP. That
must make it the most export-orientated
economy in the world.
It also, of course, means the country
is highly exposed to any trade wars or
decline in global trade. But Vietnam has
a lot more going for it; high wage growth,
which together with a growing middle
class is leading to a surge in domestic
consumption. The economy is open and
well diversified, with e-commerce growing
by leaps and bounds. And as a member of
the Association of Southeast Asian Nations
(ASEAN) free trade area, Vietnam is also
a good staging post for entry to other
ASEAN countries. So far, UK exporters are
doing best in industrial sectors such as
pharmaceuticals and machinery. But the
consumer market is a massive opportunity
– as is education and training.
Getting money out of the country is
easier than it used to be, though the dong
remains a tricky currency to trade. While
the banking sector is still underdeveloped,
the country is a leader in mobile payments
– something worth thinking about if you're
selling to smaller companies or retail
customers.
Blockchain for trade finance
CREDENDO has now started an
innovation laboratory to look at new
ideas in trade finance. Credit insurance
and surety bonds might not be the
right products for the future; trade is
becoming ever more platform-based,
and it will be looking at how to make
trade finance more appropriate to the
platforms. Perhaps you'll end up getting
your credit insurance filled up on a realtime
basis with every sale you make on
Amazon. Who knows?
Europe kicks the can down the road
AU Group recently pointed to economic
weakness in both Germany and France
– previously the motors of Eurozone
growth. Trade tensions, the Gilets
Jaunes, and regulatory shock in the
automotive sector are all blamed. The
savings ratio is up – consumers aren't
spending – and economic growth will
be 'timid' at around one percent this
year and 1.5 percent or so next.
Add to that a very high rate of
corporate indebtedness in France, and
you might want to be quite careful
about how much credit you're giving
customers.
However, anyone predicting
another crash is probably going to be
disappointed. Fiscal policies in both
France and Germany are relatively
The other big thing that Credendo
has planned is looking at how
blockchain can work for trade finance.
Currently, the process as well as
the marketplace is fragmented and
inefficient. That could all change. If
you haven't grasped how blockchain
can change things, you need to get
Blockchain for Dummies – it will
probably, over the next 20 years, change
our lives as much as the internet
already has.
supportive of the economy. Meanwhile,
for the Eurozone as a whole, kicking
the can down the road seems to have
worked; economic growth has drawn
the teeth of government debt. The
Eurozone's stability, according to the
economic data AU Group looks at, is
the best it's been since 2001. And while
government debt remains above precredit
crunch levels, real progress has
been made in reducing it over the past
ten years.
Yes, there are a few clouds on the
horizon – such as an increased populist
vote in the European Parliament
elections, and Italy breaking out of its
fiscal corset. But on the whole, Europe
seems likely to continue with modest
growth.
Choose your markets
ATRADIUS' research picks out a select
few emerging markets for growth in 2019:
Bulgaria, Vietnam, Indonesia, Peru, and
Morocco.
But more important than the choice,
perhaps, is how that selection was made.
First, Atradius looked for economies
with steady growth fuelled by domestic
consumption and investment. That's a good
start, but the team next needed to make sure
that growth was sustainable.
They next looked at the countries'
'buffers' - foreign exchange reserves, for
instance. How well would each country
withstand an external shock – a credit
crunch or a currency war? And finally,
Atradius qualified countries by their political
and institutional stability.
A lot of exporters look for growth. Some
look for safety. But the message here is that
you really do need to take a 360-degree view
– and consider both those aspects before
you pick a new market.
I have no idea
I have no idea what's happening about
Brexit. I am not the only one. The EU Council
doesn't know. The EU Parliament doesn't
know. The House of Commons doesn't know.
Theresa May doesn't know. Nobody knows.
I don't suppose you know either. And
things seem to be changing hourly. So,
whatever I write, this isn't going to be upto-date.
So, I'm sorry, there's nothing in this
column about the big issue of the day (week,
month, year).
Let's get on with something else.
If you can stand the heat
BLACKBURN fragrance and scented candle
firm Nuhr found a new export market after
its CEO read about a candle firm who'd
shipped a big order to Saudi Arabia – but it
melted in the desert heat.
Tinkering with Nuhr's product
formulation created a heat-proof candle that
wouldn't wilt under pressure – and now the
company is hoping to gain Saudi contracts
to go with its Dubai deal.
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