Canton Fair exporters upbeat as China moves up value chain

HONG KONG/GUANGZHOU: More than 80 percent of companies at China’s largest trade fair expect to export more next year, helped by innovation and currency movements, according to a Reuters poll, raising hopes of a turnaround after more than a year of weak export data. Despite concerns at rising costs and feeble global growth, the mood was mostly upbeat at the Canton Fair in Guangzhou on southern China’s Pearl River, where tens of thousands of mainland exporters and foreign buyers gather for what is regarded as a barometer of the country’s foreign trade.

Chinese exports have been falling almost continuously since the second quarter of 2015, and showed an unexpectedly large drop of 10 percent in September, despite heading into what is usually the peak year-end shopping season. A third of the 103 companies polled said they expected a rebound in the country’s exports soon, and 46 percent expect the slowdown to persist for between six and 12 months.

“The overarching environment is not that great, but we innovate so we remain competitive,” said Hill Xing, sales manager at Kemage Power Machinery, which makes small power generators for household and agricultural purposes and employs 600-700 people. Andy Zhang, sales manager at Owatch, a virtual reality start-up, echoed that theme. “Traditional industries are lagging, but new innovative industries like us will do very well,” he said. Struggling heavy industry helped pull Chinese growth to a 25-year low in 2015, and the country’s foreign reserves fell by $513 billion as the currency weakened and investors pulled out capital.

Nearly half of those polled in Canton said exports would be helped by the depreciation of the yuan, which has fallen 8.4 percent since August 2015, with another third expecting no impact. The fair, established in 1957, runs until Nov 4. Phase one, ending on Wednesday, features exhibitors covering electronics and household appliances, along with heavy machinery and building materials. Phase 2, from Oct. 23-27, covers consumer goods, gifts and home decorations, and the final phase includes textiles and apparel, office supplies, healthcare and foods.

Forty-five percent of companies said they were upbeat on their order prospects, while 51 percent were neutral and 5 percent pessimistic. On a list of eight issues polled, production costs were the biggest headache for most exporters at the bi-annual fair, which is attended by 24,553 exhibitors occupying more than 60,250 booths. This was followed by concerns over global economic growth, while rent was their least concern. Nearly 70 percent of exporters said hiring costs had climbed by up to 10 percent this year, though close to 60 percent said it was easy to get a loan for their business.

More than 65 percent of companies expect to increase investment spending by up to 20 percent next year, while 16.5 percent expect to raise spending by over 20 percent. Fixed asset investment in China grew just 8.1 percent in the first eight months of this year, the slowest pace since December 1999. Increasing labor and overall operating costs have hurt the competitiveness of China’s exporters in recent years, with many switching to cheaper destinations in Southeast Asia, while others increase automation.

“We just installed a new production line from Korea to enhance automation. It will help to ease labor costs,” said Juney Wang, manager at PVC floor manufacturer Rentier, based in Jiangsu province. Exporters said foot traffic at the fair, held in the provincial capital of Guangdong, nicknamed the workshop of the world for its manufacturing prowess, had dropped significantly from three years ago, while the buyer mix had also changed. “I’m seeing more buyers from emerging markets such as South America and Southeast Asia,” said Jason Green, marketing director at Anhui Guofeng Wood-Plastic Composite Co.

Traditional markets such as Europe and the United States have been hurt by an economic downturn, and many buyers from these countries were increasingly buying over the Internet, he added. Jason Shen, general manager at KarrDiS, an armored door manufacturer from Zhejiang province in eastern China who has attended the fair since 2007, said footfall had dropped around 30 percent from two or three years ago.