Thursday, April 16, 2015

China exporters expect more pain as economy sputters: survey

China exporters expect more pain as economy sputters: survey

[GUANGZHOU] More than half of China's exporters expect a trade slowdown to last at least six months as production costs climb and European demand weakens, according to a Reuters survey at the country's biggest trade fair.
On the opening day of the biannual Canton Fair in the Pearl River Delta, the workshop of the world, the cavernous halls were filled with international buyers, but many, especially Europeans hit by a weaker euro, appeared to be ordering fewer goods and haggling hard with manufacturers.
The fair is taking place just after economic data showed China's exports unexpectedly fell 15 per cent in March and its economy grew at its slowest pace in six years in the first quarter.
A Reuters survey of 90 mostly small to medium-sized manufacturers of goods from consumer electronics to heavy machinery and car parts showed many at the fair are expecting tough times.
On average, respondents expected their orders to rise just 3.1 per cent in 2015, while production costs, mostly labour and materials, would climb 6.5 per cent.
While 43 per cent of those polled said they expected an export rebound within six months, 24 per cent said the downturn would continue for at least six months, and a further 33 per cent put the timeframe at more than a year.
The fair has long been a barometer for the economy of China, which has been the world's biggest exporter since 2009, but the country's dominance is under threat as the currency strengthens, labour costs soar and authorities shift from an excessive reliance on exports.
Many respondents reported a continued tightness in the labour market as skilled young workers become harder to find and the economy rebalances towards consumption and services.
Some European buyers, hit by a sharp depreciation in the euro against the dollar and China's yuan, were pushing for discounts, despite exporters looking to raise prices an average of 4.6 per cent this year, the poll showed. "There are still buyers," said Zhu Xiangkui, a manager at a stall selling batteries, as he shook his head. "(But) most of them have the mentality of bargaining when they arrive." Juan Banovio, a veteran buyer from Spain with a retail business in Madrid, said some Chinese manufacturers had agreed to slash prices by 8-10 per cent as price competition intensifies and buyers become more discerning. "They understand the pressure we face in Europe ... and they're trying to help, but not much. Most European buyers are ordering less," said Banovia at a stall selling brightly coloured vacuum cleaners.
Since the 2008/09 financial crisis, China's exporters have struggled with a strengthening currency and rising labour costs, with global supply chains shifting increasingly inland or to cheaper hubs such as Vietnam and Bangladesh.
While many factories said the impact of yuan appreciation was not as significant over the past 12 months compared with previous years, the poll found that on average, manufacturers said they would be in the red if the yuan hit 5.6 to the greenback, compared with about 6.2 now. "Right now, the exchange rate (the yuan) is stable, and that's good," said George Chen, a factory manager with Qiyun Audio that manufactures amplifiers. "But if it goes below 6 (to the dollar) that would mean all factories would have nowhere to go, or at least 80 per cent of factories couldn't survive." Recent currency fluctuations, however, have offset some costs for Chinese factories, making some imports cheaper, including raw materials and precision parts from Europe or Japan.
Some 40 per cent said they were pessimistic about their factory's prospects, while 59 per cent were neutral. "We all have a kind of pessimism," said Lu Jie, a vice-general manager of YSD, a metal-forming machinery factory in the lower-cost area of Hubei in central China. "We have orders, but the environment is still so tough."
REUTERS

1 comment:

  1. Import-export's biggest challenge now is the strengthening of the dollar. However, it may normalize depending on the demand and supply. After all, China is still one of the leading export market and even for imports.

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