China's clock and watch exports may face trouble this year although volume increased in the first quarter of the year, experts said yesterday at a forum discussing trends in the sector.

The biggest barrier remains the Restriction on the Use of Hazardous Substances (RoHS) in electrical and electronic equipment, a law issued by the European Parliament and the European Council in 2003, said Zhong Weiqiang, director of Guangdong Province Horologe Association.

The restriction states that from July 1 this year, all electrical and electronic products imported into the European Union must conform to the RoHS standard.

Products must, with some exceptions, be free of lead, mercury, cadmium, chromium, polybrominated biphenyls, and polybrominated diphenyl ethers.

Some Chinese enterprises have been taking part in industry fairs in Hong Kong and Guangzhou but many firms still have a wait-and-see attitude, said Zhong.

Taking lead as an example, it is widely used in the electronics industry. Firms have to pour money into finding lead-free alternatives and manufacturing processes.

Therefore, the RoHS rule means exports to Europe bear higher costs resulting in lower profits for manufacturers. This will have a negative impact on exports, according to Zhong.

Chinese clock and watch manufacturers are not fully familiar with the requirements, said Ma Xiaogan, vice-president of the Shenzhen Watch & Clock Association. It is urgent they learn about the situation in full and take proper measures to ensure their products meet standards.

Under these circumstances, Chinese enterprises should re-examine supply chains to ensure products are up to scratch. They need to spend more money testing for the hazardous elements.

"This means that some companies will have to change their techniques and invite a third party to do a proper test," Ma told China Daily.

The fluctuation of the exchange rate of the renminbi to the US dollar is also a worry for Chinese manufacturers. With the appreciation of the renminbi, Chinese exporters will most probably see less profit causing difficulty for manufacturers, according to Ma.

In addition, there is intense competition between domestic rivals which results in a disordered market, which, in turn, can harm the development of the industry.

Statistics indicate that Shenzhen, a manufacturing base of the industry, exported a total value of US$140 million in the first two months of this year, up 31.8 per cent compared with the same period last year.

Some experts at the forum agreed the Chinese mainland is facing a rare chance to develop.

With their bulging wallets, people have the desire to enjoy the consumption of luxury goods. Xu Dongsheng, managing director of Shenzhen FIYTA Holdings Limited, a famous watch brand in China, said the Chinese market was becoming more and more integrated with the rest of the world.

A survey showed that more than 60 per cent of consumers prefer Swiss watches.

Editor: Yan