Chinese electronics maker TCL Corp.’s overseas customers are reducing the duration of manufacturing contracts on concern the yuan will weaken further, making it difficult to cut costs, according to the company’s chief executive officer.
“Clients are placing more short-term orders, for two or three months," Li Dongsheng, chairman and CEO of the Huizhou, Guangdong-based firm, said in an interview in Beijing on the sidelines of the National People’s Congress. "This adds pressure to our management of costs and to our supply chain planning."
Customers usually place orders a year ahead when they expect the currency to strengthen, Li said, adding that overseas sales accounted for 47 percent of revenue in 2015. TCL’s revenue increased by 3.2 percent last year, the slowest since 2008, in what Li said was due to sluggish external demand. TCL shares rose 2.6 percent as of 1:25 p.m. in Shenzhen on Monday, paring losses over the past year to 25 percent.
The yuan has weakened 4.4 percent since the People’s Bank of China rattled global markets by devaluing the currency in August. Although policy makers have supported the exchange rate, the median forecast in a Bloomberg survey is for a further 3.8 percent drop by the end of this year. Figures released last week showed a 25.4 percent tumble in exports, while PBOC Governor Zhou Xiaochuan told reporters on Saturday that China won’t depend on foreign-exchange policy to boost overseas shipments.
"It’s not likely that the yuan will weaken significantly this year, but it’s possible that the currency will be volatile in the short run and depreciate as a trend," Li said. "I hope the yuan can stabilize soon."
— With assistance by Tian Chen, and Ran Li