International Trade in Global Financial Crisis

The subprime crisis has led to the great power of the global financial crisis. It seems that this expression overestimates the strength of great power. But we can not ignore the economic globalization which makes economic communities connect with and influence each other positively or negatively.

In the financial tsunami hitting every corner of the world, what are the status quo and future trend of international trade?

First, you need to look at the market chain:

- Raw materials
- Companies processing of the finished product (the producers)
- (Suppliers - trade companies)
- Logistics companies
- Importers
- Wholesalers
- Resellers
- End-users, financial service providers such as banks, and Internet platforms for international trade led by Alibaba.

On the chain, all the elements are interactional and can transmit to one another. Transmission pricing is a key element. Exchange rate affects the trading price. We can start with the importer, one of the initiators of trade. With the global financial tsunami that seems gradually calming down, a procurement manager working with a large company that was founded one hundred years ago they talked about their current situation: we are now facing an extremely high pressure in the sale detail and the need to reduce the retail prices of our products in the market.

The manager urges suppliers to reduce prices with three simple reasons:

1. Against the backdrop of financial crisis, commodity prices have fallen;

2. Significant reduction in prices of energy products such as petroleum means lower freight and storage costs and

3.With decrease the amplitude of the wave and stable financial crisis, exchange rate will tend to stabilize and grow.

So why providers must reduce their prices? Because in the end the consumption of commodities is facing much lower purchasing power of the country because of the financial crisis. The information from the consumer end is that the index of consumer confidence falls and groups of consumers (including corporate and individual procurement) reduce costs, expenditure and consumption. With a market so weak, traders can use only the reduction in prices as a sharp instrument to stimulate consumption. Merchants promote psychologically by enabling consumers to buy the same goods for less money than before. Wholesalers and retailers in the middle of the chain to deliver the goods in the chain from one level to another. During this course, earn profits and ensure normal movement of goods. Their sensitivity to the price and inventory leads to action of the importer referred to above. As for wholesalers facing high retail pressure, lower purchasing power and weak sales, the price is the only effective solution to improve sales.

As for supplies, those who are able to provide the commodities market inexpensive, with good quality will have a market share, no matter they are wholesalers or importers. This low price transmission resulting in larger trade volume. With increasingly stable financial community, trade will tend to be active and large in which consumers have suitable savings and their purchasing power and consumption confidence index rise. Maybe the experts and scholars thus conclude that the crisis is over and the economy begins a journey of recovery. When it comes to bulk commodity market, economists say that its bull market ended the price of oil has peaked. Those people trade at the peak of the bull market have made a big loss due to substantially lower price. The time for them to recover from such a loss can be longer than that for the crisis to come to the end. Therefore, the goods at low prices will benefit people in a certain period of time.

Subsequently, we will discuss the transmission of prices from the point of view of suppliers. With the global financial tsunami that leads directly to the volume of trade significantly reduced in size, is really a thorny problem to retain customers, while continuing to make profits and reduce risks and losses in such an environment. To maintain normal operation, the supplier may adjust the prices of their products or accept orders and deposit foreign exchange if exchange rates fluctuate narrowly, waiting for further stabilization and rebound in the exchange rate. They look like the ones that are supplied to stocks purchased at high prices and wait to be unbundled and reducing loss. The prices of products from suppliers will be affected by that of raw materials. You can not ignore the crisis directly makes many small and medium-sized enterprises (SMEs) fail, or stand on the brink of bankruptcy, or reduce their employees. As Internet trading platform, Alibaba, which has a close relationship with SMEs, said that in the coming years will be a winter in its operation. A lot of small and medium-sized businesses get the orders, usually small ones, through Alibaba. Because of the crisis, there are more small orders from Alibaba for SMEs. With the economic depression caused by the crisis resulting in global inflation and big ups and downs in price, the lack of orders has directly led to huge loss of SMEs, especially those that focus on export trade. As a result, there is an increased failure of SMEs operating on a high-cost and low base price. The failure and the withdrawal of SMEs have directly involved the proceeds of Alibaba that mainly provides services for SMEs. Considering this point, the financial crisis also leads to early arrival of the Internet Business-to-Business E-commerce. Internet E-commerce search of new discoveries in a waiting mode to its source.

What about logistics companies between importers and suppliers? Suppliers or importers have a direct business with logistics companies. Significantly restricted the volume of goods causes the excessive capacity of these shipping companies and shippers. There is also the trade of goods to be zero for the transport of goods to countries near the sea. In fact, transportation is paid by importers. However, for now, the cost of shipping is significantly less than in the past. Similar to the shipment by sea and by air, International Business Express has seen a sharp decline in the delivery of samples and records the result of a decrease in trade. It may be noted that most of the commercial chain influenced will suffer loss. What about banks? It is not practical to say that the destruction of trade will lead to the weakening of banks' activities. At most banks will have less turnover in loans and export bill purchase. These derivative financial instruments that are affecting banks, seemingly not in the same field as the trade.

The financial crisis is a situation where the chain breaks capital of the financial system. Superficially, there is not enough money in the economy. In fact, the reason is that the circulation of money is not good. Superficially, companies or traders do not have funds or lack of funds and can not get loans from banks. Money can not move freely. These have led to the fact that companies go bankrupt, or reduce the size of production, or even slow down their expansion. The contraction in production and manufacturing industry can be seen directly from less orders and substantially reduced procurement volume of importers. On the side of retailers, they sell their inventory as soon as possible, to sell at discounted prices to recover cash, and inventory control, or even keep zero inventory. As the financial turmoil has affected the normal running of business, resulting in large fluctuations in exchange rates and currency depreciation. As a result, the cost of supply will be higher. Trade is hit severely both increase and decrease of the purchase cost of purchasing power. Right now, dealers need more economic assets than ever to offset losses caused by the financial shock. If the volume of sales of goods at low prices soaring in a country or region, trade friction between the trading countries will come out, without exception, during the financial crisis. If there are too many goods imported into a country, this as a direct result of increasing trade protectionism and other trade barriers that violate the principle of free and fair trade. In previous crises, the countries set trade barriers to hold back the goods at low prices by the exporters, in order to protect its local industries have been hit, to lower the unemployment rate, and to prevent the spread of the crisis a broader scope. These measures are based on individualism instead promote global economic depression. Those measures designed to protect domestic enterprises or local, are not good for recovery from a crisis. It will take more time to recover when the economy goes down. In this financial crisis, a newspaper article titles that governments have invested a huge amount of money to save the market and central banks have greatly reduced interest rate consecutively to stimulate the economy, the consumption of cars, avoid long-standing economic depression, reduce financial fluctuations and reduce the enormous damage caused by the crisis. At this time, is both a risk and an opportunity for international trade. Risk means that companies and banks can fail at any time during possibilities means that consumers around the world need more cheap goods. The commodity bull market of the world is over. Seems to say that people need to have cheaper goods with good quality before lack of money.

In such an economic context, as do companies deal with the situation on the market chain? After every crisis, there are the economic and trade throughout the world. It 's the ideal time for companies to rebuild, merge and acquire. Those companies with abundant cash flow will expand and develop in this time through the above measures. Exporters shall seize opportunities to collaborate with international brand companies. Strength of low cost will play a more important role in future business....