Agricultural exports hit rouble barrier

The falling value of the rouble and the ongoing financial woes in Russia will bring more risks toChinese exporters, industry sources said on Friday.

Agricultural businesses in Northeast China are likely to be the most affected as the region recently clinched a flurry of export contracts after Russia imposed trade restrictions on farm produce from the European Union and the United States earlier this year. Most of these firms now face daunting prospects of selling at a loss or not selling at all, the sources said.

A spokesman for the foreign trade bureau in Liaozhong county near Shenyang, capital city of Liaoning province, said: "Since most of the export contracts are settled in roubles, Chinese companies face the risk of incurring considerable losses due to currency depreciation."

Liaozhong inked several deals in September to supply Russia's Far Eastern region with fruits and vegetables, with most of the shipments set to start next year.

According to the spokesman, most of the exporters may defer the shipments, especially if the rouble does not recover lost ground, as they may incur steep losses.

Among the prominent deals that appear to be in trouble are the 800 million yuan ($129.03 million) deal signed by Shenyang Weiyun Fruit Co Ltd to supply apples.

Meng Xianwei, chief executive of Weiyun Fruit, said exports to Russia account for more than half of the company's business. He, however, said that his company has not been affected till now as the contract is yet to come into effect.

"We are very concerned about this (the rouble depreciation) and if the currency continues to depreciate, we may have to seriously reconsider our strategy," said Meng.

The rouble plummeted to 67 per dollar on Tuesday before recovering to around the 60 mark earlier on Friday, losing nearly half its value against the dollar this year.

Some exporters have already felt the chill.

Yang Baoguo, a sales manager at the Heilongjiang-based Suifenhe Baofu Economic and Trade Co, said that Russian orders for garments stopped around a month ago, while orders for vegetables have fallen by nearly 50 percent.

"Our business has been slumping this year due to the weak economy in Russia. But, since last month the situation turned from bad to dire," he said. "There is nothing that we can do about it, but wait for the rouble to recover."