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Global importers and distributors are suffering tremendous increase on brass ball valve price since the outbreaking of corona virus in 2020, if you want to know why it happened though the world economy is weak, you've come to the right place.
Table of Contents
- The Cost of Labors
- The Cost of Energy and Raw Materials
- The Cost of Exchange Rate
- The Cost of Capital
- The Cost of Taxes
- The cost of Social Security
7 The Cost of Land - The Cost of Logistics
brass ball valve costs - The Cost of Labors
In recent years, labor costs in China have risen rapidly. First, due to changes in China's demographic structure, the proportion of the working-age population (16-59 years old) in the total population reached a peak in 2010. In recent years, the absolute amount of the working population has begun to decline. Therefore, the era of unlimited supply of surplus labor has ended, and labor supply and demand have ended. The changes in the relationship make the labor cost of enterprises rise rapidly. Secondly, while protecting the legitimate interests of workers, the "Labor Contract Law" has significantly increased enterprises' social security expenditures for employees. Third, with the continuous improvement of residents' income level and quality of life, the demand for leisure and other leisure activities will increase, which will reduce labor hours and increase labor supply. Fourth, as some women return to their families, the employment participation rate in China is declining.
According to statistics, the average salary of employees in Chinese units rose from 15,920 yuan in 2004 to 56,360 yuan in 2014, an average annual increase of 13.5%. International comparisons show that China's labor costs are rising not only significantly faster than developed economies such as the United States, Japan, and Europe, but also faster than developing countries such as South Africa and Brazil. From 2008 to 2014, the average annual nominal growth rate of the average wage of employees in Chinese units reached 11.8%. After deducting price factors, the actual growth rate was about 9%. During the same period, the real wage growth rate in the United States was only 1.9%, in the euro area it was 0.5%, and in Japan it was -0.8%; in South Africa and Brazil, real wage growth was 3.2% and 5.7% respectively. It can be seen that the rapid rise in labor costs has seriously weakened the competitiveness of Chinese brass ball valve manufacturers.
- The Cost of energy and raw materials
Although the prices of bulk primary products in the world have generally fallen sharply since the financial crisis, due to factors such as transaction taxes, pricing mechanisms, circulation costs, and sources of raw materials, the cost of energy and raw materials in China is generally higher than that of major energy sources such as the United States, Russia, and Brazil. market. Relatively high energy prices have an inhibitory effect on the competitiveness of Chinese brass ball valve manufacturers.
Since the impact of the new crown epidemic in 2020, the expectation of global demand recovery has continued to drive the rise in commodity prices. Recently, commodity prices have risen rapidly again, and commodities such as iron ore, thermal coal, coke, and rebar have risen rapidly. In general, we believe that the gradual recovery of global demand, the slow recovery of supply, and the emphasis on industrial chain security by various countries are the three main factors for this round of price increases.
Brass raw material price has exceeded its historical level, which lead to huge cost increase for brass ball valve manufacturers in China.
- The Cost of Exchange Rate
Although the CNY has recently depreciated significantly due to factors such as interest rate hikes by the Federal Reserve, since the implementation of the exchange rate reform on July 21, 2005, as of January 21, 2016, the CNY has generally appreciated against the US dollar, 1 The exchange rate of USD to CNY rose from 8.2765 to 6.5585, a cumulative appreciation of 26.2%. During the same period, the CNY appreciated by 40.0%, 30.5% and 26.8% against the euro, Japanese yen and Hong Kong dollar respectively.
After the international financial crisis, many countries and economies in the world have devalued their currencies in order to recover their own economies and promote exports. Since July 2008, the yen has depreciated by about 11% against the US dollar, and the Indian rupee has depreciated by 56.7% against the US dollar. Affected by the slump in primary product prices and the geopolitical situation, the Russian ruble, South African rand, and Brazilian real depreciated against the US dollar by 257.1%, 112.4% and 151.6% respectively. The competitive devaluation of major currencies made the CNY effective exchange rate appreciate more than the market exchange rate. Therefore, the sharp appreciation of the CNY has brought enormous pressure to the export of Chinese brass ball valve manufacturers, resulting in a significant decline in the competitiveness of export products, a decrease in export demand, and even affecting the survival of some foreign trade enterprises. - The Cost of Capital
International comparisons show that China's benchmark one-year loan interest rate in 2014 was 5.6%, much higher than developed economies such as the United States (3.25%) and Japan (1.22%), but much lower than Brazil (32.01%) and Russia (11.14%). ), India (10.25%), South Africa (9.13%) and other developing economies.
The above values reflect the difference between China's nominal loan interest rate and the interest rates of other countries. If we consider that China's industrial producer price (PPI) in 2014 was -1.9%, the real interest rate of Chinese corporate loans was 7.5%, while the actual loan interest rate of other countries in the same period was 7.5%. Interest rates are generally lower than benchmark lending rates, so China's actual lending rates are significantly higher than other major economies except Brazil. In addition, the intermediary costs of Chinese corporate loans are relatively high, and the costs of evaluation, insurance, and consultant fees are generally higher than the average level of other countries. Therefore, the high capital cost is one of the important factors leading to the decline of the competitiveness of Chinese brass ball valve manufacturers.
brass ball valve manufacturers - The Cost of Taxes
According to the international standard macro tax burden calculation method, China's macro tax burden was as high as 37.2% in 2014, which has exceeded the average level of developed countries (between 30% and 35%), which is extremely incommensurate with the development stage of China. . At the same time, contrary to the “high tax burden, high welfare” policy adopted by developed countries, China implements a higher tax burden at a lower welfare level. And China's high macro tax burden is mainly reflected in the high tax burden of the corporate sector, which is not conducive to corporate investment and innovation. According to the calculation of the flow of funds statement, the corporate tax burden in 2012 was equivalent to 47.4% of its tax-included disposable income.
Therefore, China has a lot of room to reduce the tax burden of enterprises and residents in the future, which is mainly reflected in reducing the excessive tax burden and social security payment burden of the corporate sector by revitalizing huge government savings, and reducing the tax burden through universal fee reduction and inclusive tax reduction. To further reduce the corporate tax burden. In the future, the reform of state-owned enterprises, the enrichment of social security by state-owned capital, and the improvement of profits turned over by state-owned enterprises will be enjoyed by the whole people, which can provide a broad space for reducing corporate taxes and fees. In addition, the tax system reform, which mainly focuses on replacing business tax with value-added tax, will further reduce the burden on enterprises.
According to data from the State Administration of Taxation, as of the end of June 2015, a total of 5.09 million taxpayers had been included in the pilot program of “replacement of business tax with value-added tax”, of which 940,000 were general taxpayers, accounting for 18.47%, and 4.15 million were small-scale taxpayers, accounting for 81.53%. In the first half of the year, a total of 110.2 billion yuan was reduced in tax by "replacement of business tax with value-added tax", of which the pilot taxpayer directly reduced the tax by 60 billion yuan, and the original VAT general taxpayer deducted 50.2 billion yuan due to the increase. Since the implementation of "replacement of business tax with value-added tax" in 2012, a cumulative tax reduction of 484.8 billion yuan has been achieved. According to the reform plan, in 2016, the “replacement of business tax with value-added tax” in the life service industry, construction industry, real estate industry, finance and insurance industry and other industries will be completed, involving nearly 10 million taxpayers.
- Social Security cost
Statistics show that from 2003 to 2014, China's social insurance fund income increased rapidly from 349.515 billion yuan to 4,043.881 billion yuan, an increase of 10.6 times in 11 years. Growth rates were above 15% in most years. China's social security system is mainly composed of "five insurances and one housing fund". The latest data shows that the five social insurance contributions total 39.25% of the total wages of enterprises. Among them, the total endowment insurance rate is 28% (20% for units and 8% for individuals), 8% for medical insurance (6% for units and 2% for individuals), and 2% for unemployment insurance (the proportion of units and individuals varies from province to province). Work injury insurance and maternity insurance are paid by the unit but not paid by individuals. The average rate of work injury insurance is about 0.75%, and the average rate of maternity insurance is no more than 0.5%. It can be seen that the five social insurance rates currently borne by employers are about 29% of the total wages of employees in the unit, and the total rate in some areas exceeds 30%. Labor costs are high.
The high social insurance rate has indeed led to an increase in the labor cost of enterprises, affecting the production and operation and economic benefits of enterprises. Some enterprises have even moved to countries with relatively low labor costs. By comparing the proportion of social security contributions in fiscal revenue between China and the world's major economies, it can be found that compared with the United States and the euro area, China's social security contributions account for a lower proportion, mainly because they implement "high welfare" policies. , the level of natural social security contributions is higher. Compared with Japan, its neighbor in East Asia, China's social security contributions account for a relatively high proportion, exceeding the level of economic development. In addition, among the BRICS countries, China has a lower proportion of social security contributions compared with Brazil and Russia, but a higher proportion compared with countries with lower economic development levels such as India and South Africa.
7 The Cost of Land
With the rapid advancement of urbanization in China and the explosive growth of the commercial housing market, housing prices and land prices have pushed up each other, land prices have continued to rise, and the cost of corporate land has increased significantly. From the monitoring price of land transfer in major cities across the country, there has been an accelerated upward trend since 2008. Although it has slowed down since 2012, the land transfer price still shows an upward trend. The comprehensive land price increased from 3,093 yuan/square meter in the third quarter of 2012 to 3,606 yuan/square meter in the third quarter of 2015. The price of industrial land increased from 662 yuan/square meter in the third quarter of 2012 to 753 yuan/square meter in the third quarter of 2015.
The prices of various types of commercial housing in China continued to rise rapidly. The average annual sales price of commercial housing in China rose from 2,112 yuan/square meter in 2000 to 6,324 yuan/square meter in 2014, an average annual increase of 8.1%, and a cumulative increase of 200%. Among them, the sales prices of residential, commercial and office buildings increased by 8.3%, 8.2% and 6.7% respectively, and the cumulative increase was 205%, 201% and 149% respectively. The rise in the prices of commercial housing and office buildings will directly increase the cost of business operations.
International comparisons show that from 2000 to 2014, the average annual selling price of commercial housing in China increased by 200%, significantly higher than the increase in major developed countries. During the financial crisis, US housing prices fell sharply. The commodity housing price index bottomed out in 2011 and began to rebound in 2012. It is now close to the high point before the financial crisis, with a cumulative increase of about 51% compared with 2000. The Japanese house price index is basically stable, and has hardly risen in recent years; the euro area house price index has only risen by about 6% in the past ten years. Relatively speaking, the house price index in South Africa and India has also risen rapidly. From 2000 to 2014, the price index of single-family houses in South Africa increased by 369%, and from 2009 to 2014, the national house price index in India increased by 163%.
brass ball valve manufacturers china - The Cost of Logistics
In recent years, China's logistics costs have been decreasing. The proportion of China's logistics costs in GDP has dropped from 17.6% in 2009 to 16.6% in 2014, but it is still much higher than that of the United States (8.3%) and Japan (8.5% in 2014). %) and other developed countries, it is also higher than the world average logistics cost as a percentage of GDP (11.7%). Therefore, the higher logistics cost of Chinese brass ball valve manufacturers is one of the important reasons for the increase in the overall cost of brass ball valve manufacturers.
From the perspective of the composition of logistics costs, in 2014, China's transportation, storage (warehousing) and management costs accounted for 52.9%, 34.9% and 12.2% of the total logistics costs, respectively. From 1991 to 2014, the proportion of transportation expenses in GDP dropped the fastest, from 13.3% in 1991 to 8.8% in 2014; the proportion of administrative expenses in GDP dropped the slowest, only 1.2 percentage points in 13 years. Although compared with 1991, China's various logistics costs have decreased, but compared with the United States in the same period, transportation costs accounted for 3.5 percentage points of GDP, storage (warehousing) costs accounted for 3.1 percentage points of GDP, and management costs accounted for 3.1 percentage points. The proportion of GDP is 1.7 percentage points higher. It can also be seen that there is a large room for decline in various logistics costs.
Final Thoughts
We've anlaysized the costs brass ball valve manufacturers from eight different aspects, by which you can understand why the brass ball valve price increased so much, it will be helpful when you communicate with brass ball valve manufacturers.
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