* Exporters at Canton Fair see 4 pct order pickup in
2012-poll
* Outlook still cloudy on weak European demand
* Fall in material costs help offset wage inflation
* Yuan rise to 5.99 yuan/USD would be huge blow for
exporters-poll
By James Pomfret
GUANGZHOU, China, Oct 22 (Reuters) – Chinese exporters at
Asia’s largest trade fair expect orders for made-in-China
products to remain resilient for the rest of this year and even
grow slightly despite shrivelling demand from debt-stricken
Europe and the strengthening yuan currency.
A Reuters poll of 85 small- to medium-sized exporters at
China’s Canton Fair found that while around a quarter of firms
surveyed expected orders to drop this year, overall, orders were
seen rising an average four percent in 2012 and 7.4 percent in
2013.
The results are reflected in Chinese trade data in September
which showed exports growing 9.9 percent year-on-year, almost
twice the rate expected, while imports returned to expansion
after a period in the doldrums. Chinese officials have warned
however that it was just one month’s data and not enough to
predict a trend.
“Pent-up demand that was withheld in the third quarter is
being released in the fourth quarter and that will provide
support for China’s exports,” said Tim Condon, ING’s head of
Asian research.
While trade sentiment can be difficult to gauge across
diverse and seasonally-influenced sectors, the Canton Fair,
crammed this autumn with an estimated 24,000 exporters, is a
closely watched biannual indicator of China’s gargantuan export
market.
In the halls of the fair, set beside the Pearl River in
Guangzhou city, there was much talk of global economic weakness
sapping demand for Chinese goods. But there was also an
undercurrent of resilience as Chinese factory owners shift to
cheaper inland regions, launch higher-value-added products and
tap new markets abroad and at home.
Forty-six percent of those polled across a range of sectors
including chemicals, machinery, electronics, household
appliances, construction materials and computing hardware, were
optimistic about their prospects, while 41 percent were neutral
and 13 percent pessimistic.
YUAN WEIGHS
The steady strengthening of the yuan has also been a burden
on exporters who have borne a nearly 30 percent appreciation of
the currency against the greenback since 2005, making
Chinese products relatively more expensive.
Ken Bloom, CEO of INTTRA, a firm handling bookings for
nearly 18 percent of global container traffic, said the U.S.
Federal Reserve’s fresh bout of quantitative easing last month
that depressed the U.S. currency and pushed the yuan to a record
high against the dollar earlier this month, was hurting Chinese
exporters.
“As the dollar decreases its value, the exporting countries
that are pegged to the dollar, the countries of Southeast Asia,
have seen a pickup in their exports at the expense of China,” he
said.
Exporters at the Canton Fair indicated that should the yuan
appreciate just another four percent to 5.99 to the U.S. dollar,
they would start to lose money. The yuan closed on Friday at
6.25 yuan to the greenback.
“China is losing its competitiveness,” said Pradip Mithani,
an Indian businessman at the fair who was looking for bicycles
and other products for African markets. He said he was now
buying a large number of lower-end products from India.
“In four to five years time, the impact of this (yuan
appreciation) policy will be very high.”
Despite the recent uptick in September China exports, trade
officials have sought to dampen talk of a broad recovery. Canton
Fair organisers said the number of foreign buyers in the fair’s
opening week had fallen 11.4 percent compared with the same
period in the spring session.
“We are happy to see that the September trade data has shown
some positive changes,” Commerce Ministry spokesman Shen Danyang
told a news conference on Friday. “But with only a single
month’s figure, it is still not enough to judge a trend of
recovery due to the complicated external economic environment.”
Domestically, economists say China likely hit the bottom of
a seven-quarter long economic downturn between July and
September, but recovery prospects remain tepid.
Participants at the fair expressed doubts about global
conditions.
“The next year perhaps Italy and France could also have big
problems so the demand for Chinese goods will fall further,”
said Javier Rodriguez Rivas, a buyer of light bulbs and plumbing
materials who said he was ordering 20 percent less goods at this
fair given weaker consumer demand back home in Spain.
BANKRUPT
One out of every 10 exporters polled said they were worried
about going bankrupt.
“I’m pessimistic about demand, even in Africa, the Middle
East and also Southeast Asia,” said Yu Yuefeng, the
industrialist owner of the Phoenix bicycle brand in Shanghai,
who exports around three million bicycles each year.
“Many of our customers say they still have a lot of stock as
sales have been very slow … This is worse than the financial
crisis (in 2008 and 2009), because the pain and uncertainty has
dragged on for longer.”
To cope with leaner times, higher costs and scarcer orders,
many exporters, about 62 percent, said they had developed and
launched new, higher value-added products in the past 12 months,
“It’s almost impossible to compete for standard products so
we have to innovate. The greatest challenge for us is against
other Chinese rivals,” said Yi Jichun, whose firm Jiuzhou has
moved into producing high-definition routers and mini projectors
from manufacturing cables and wires.
While the survey found an average production cost rise of
8.7 percent this year, exporters had only raised prices an
average of 1.6 percent. Twenty percent had also moved some
production to cheaper inland regions over the past year.
Many exporters said, however, that production cost hikes
this year have been offset by a substantial fall in raw material
costs such as copper, aluminium and steel, though wage inflation
remains an issue with 66 percent of respondents experiencing
labour shortages in China.
(Additional reporting by Alison Leung, Anne Marie Roantree and
Sisi Tang in Hong Kong; Editing by Raju Gopalakrishnan)
