Wang Yuanyuan
Although overseas orders for Christmas ornaments increased by about 30 percent this year, many Shenzhen manufacturers were not happy because of a fall in profits.
According to ornaments manufacturers, factors such as sharp increases in the cost of materials and labor and the appreciation of the yuan were the main reasons for the decline in profit.
Although we had about a 30-percent increase in sales and a 20-percent increase in prices this year, our profit was even less than last year. Sharp increase in raw materials was one of the main reasons for the fall in profits, said Li Yiming, a manager at Shenzhen Zhuoyue Trading Co. Ltd.
Prices for cotton and resin, the two most widely used raw materials in Christmas ornaments, had increased by about 25 percent in recent months. The price for cotton has gone up from 18,000 yuan (US$2,730) to 27,293 yuan per ton from September to December, said Hu Yuping, manager of Shenzhen Mingxin Toy Co. Ltd.
Increases in wages were another reason for less profit because most factories were labor-intensive. In recent years, many factories have had problems hiring workers. In the peak production time in July and August, we had to increase wages by 20 to 30 percent to keep workers, Hu said.
Just when the orders were finished and the bills sent to the buyers, the yuan appreciation caused another 2 percent drop in profit.
Shenzhen is one of the biggest Christmas ornament production base in the world. According to official statistics, exports of Christmas ornaments reached US$710 million in the 10 months to October, 28.5 percent up last year.
But we did not make any profit from the increase, Hu said. Most factories had made deals with buyers at the beginning of the year. The prices we agreed would have brought us about 10 percent in profits, but after the [yuan] appreciation at the end of the year, there was little profit left for us, he said.
For instance, if we received US$1 million from the buyers. According to the exchange rate in March, we would have received about 6.8 million yuan in October, but we received only 6.65 million yuan due to the appreciation of the yuan, Li said.
