China focus: Canton Fair foretells grim trade outlook, economic rebalancing
2012-October-22 Source: China View website
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People visit the 112th China Import and Export Fair in Guangzhou, capital of south China's Guangdong Province, Oct. 15, 2012.

With the world economy mired in a chronic slowdown since the 2008 financial crisis, China's largest trade fair offers a glimpse into the country's foreign trade situation as well as the economic outlook.

The autumn session of the Canton Fair wrapped up its first week of display on Friday, mainly focusing on machinery and electronics products, hardware products and chemical products.

Statistics from the fair's organizer show that the number of overseas buyers to the fair -- a barometer of China's export situation -- declined considerably, indicating weak global demand amid a sluggish recovery, compounded by a more recent eurozone debt crisis.

The fair registered a total of 93,529 overseas buyers as of Thursday, a decline of 11.4 percent over the same period in the spring session.

At a time when the entire world is tightening its belt, global buyers are more cautious and hesitant in clinching orders.

"We are feeling much pressure, as the number of European and U.S. buyers visiting our booth dropped by more than half during the fair, and those who did visit seemed in a low mood to order," said Chen Dong, vice manager of Guangdong Machinery Imp. & Exp. Co., Ltd.

Chen said his company had already witnessed a sales decline of 5 percent in the first half of this year.

China's foreign trade in the first three quarters of the year rose a mere 6.2 percent to 2.84 trillion U.S. dollars, sharply contrasting the 20.3-percent growth registered during the same period in 2011, according to the General Administration of Customs.

Despite a brisk export surge of 9.9 percent to a monthly record-high export volume in September, and a 2.4 percent recovery in imports after consecutive falls in previous months, the trade outlook in the last quarter as well as that for all of 2012 remains gloomy, and experts say a rebound is unlikely in the foreseeable future.

The grim foreign trade outlook is further dampened by a disheartening overall economic situation.

In the third quarter, China's economy expanded 7.4 percent year on year, slowing from 7.6 percent in the second quarter and 8.1 percent in the first, according to figures released by the National Bureau of Statistics (NBS) on Thursday, indicating that the country's economic growth has been on a descending trajectory.

Enterprise representatives interviewed at the fair say the persisting eurozone debt crisis is hindering the recovery of global demand.

Chinese machinery and electronics exports to the European market dropped 23.1 percent during the fair, in great contrast with a 7.5-percent decline to the American market and a slight dip of 0.3 percent to Africa, said Liu Chun, secretary-general of the China Chamber of Commerce for Import & Export of Machinery and Electronics Products.

Machinery and electronics products account for about 60 percent of China's total exports.

"The sagging economy in Europe is mainly to blame for the cooling down of global trade," Liu said.

ECONOMIC REBLANCING: A WAY OUT

The recovery of trade will restore vitality to the global economy, and this is a necessary step in realizing global economic rebalancing, experts say.

Mao Huimin, vice president of Zhejiang-based Andeli Group, said company sales this year are expected to rise 20 percent despite the economic hardship.

Mao attributed the success mainly to the company broadening its market beyond Europe and the United States.

Andeli is a leading producer in the country's machinery and electric industry, with products ranging from circuit breakers and current transformers, to distribution boxes and welding and cutter machines.

While sales to Europe have dropped since last year, the company has managed to expand in other markets such as Southeast Asia, the Middle East, South Africa and Latin America, Mao said.

"Though the European and U.S. markets remain dominant in our trade, developing countries are catching up from behind, and their shares on the world market will further rise," Mao said.

Stringent overseas demand has also forced Chinese manufacturers to reconsider the domestic market, and experts say this will bring fundamental changes to the global market as well as the industrial scenario.

China has experienced a relatively high growth of over 20 percent in its foreign trade over the past decade, partly thanks to the country's ascension to the World Trade Organization in 2011.

With rising pressure from overseas markets, the Chinese government is encouraging export-oriented companies to take another look at the domestic market.

Ruan Moteng, a marketing manager with Yingli Green Energy, one of the country's largest solar panel makers, said the Chinese market has accounted for about one-third of the company's shares, although the majority was taken by the European and U.S. Markets.

But with trade protectionism escalating in these two major markets, many Chinese solar energy companies like Yingli Green Energy are trying to expand their businesses at home and in other emerging markets.

Experts say the global economic rebalancing is speeding up, characterized by a transfer of Chinese labor-intensive industries such as garment manufacturing to neighboring countries like Vietnam and Indonesia, though a massive industrial drain is not likely for a long period of time.

Statistics from Guangdong authorities show that a total of 41 investment projects have moved out of the province to seven other countries within the year.

Among the projects, which were mainly focused on garment and shoe manufacturing, 15 went to Malaysia and 13 moved to Vietnam.

 

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Editor: Jecey
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