Wednesday, April 07, 2010

Economy: China's exports recovering from global economic crisis

China's exports are recovering from the impact of the global financial crisis, according to a survey of 551 China exporters by Global Sources

Sixty-four percent of the suppliers interviewed said their overseas sales have seen some recovery, while 8 percent claim strong recovery. Only 11 percent of manufacturers have not yet experienced a rebound in overseas orders.

"China's export industries are showing strong signs of a rebound, as orders from the U.S. and the EU have started to increase," said Craig Pepples, Global Sources' chief operating officer. The survey further indicates China suppliers are optimistic about overseas sales in the coming months. Eighty- three percent of companies expect an increase in orders through June 2010, 13 percent anticipate no change, while only four percent foresee a drop in orders.

Exporters, however, are conservative about sales growth projections. More than half of suppliers expecting growth in orders predict increases between 5 and 15 percent. Among surveyed suppliers:

-- 17 percent of suppliers expect overseas orders to grow by more than 25 percent;
-- 16 percent anticipate expansion between 16 and 25 percent;
-- 19 percent of suppliers expect 11 to 15 percent growth;
-- 38 percent see a 5 to 10 percent rise in orders, and;
-- 10 percent forecast shipments to increase by up to 5 percent.

Renewed focus on the U.S. and EU markets

Another significant finding of the survey is a revived emphasis on the traditional export markets of the U.S. and EU. In 2009, many exporters began exploring emerging markets, which helped suppliers minimize losses as orders from conventional destinations declined.

In the first half of 2010, however, suppliers have shifted emphasis back to the U.S. and EU. Compared to the second half of 2009, 23 percent fewer survey respondents are planning to target non-EU countries and other emerging markets in first half of 2010. In contrast, 17 percent more suppliers cited that they plan to concentrate on the U.S., Canada and the EU markets.

Price competition the main challenge

Despite the positive economic outlook, suppliers noted buyers remain as price-sensitive as they were during the height of the financial downturn.

"With the rebound in export orders, costs of raw materials and labor are on the rise," Pepples said. "But buyers are still finding it difficult to take on the additional costs. This is adding pressure to suppliers' profit margins."

Regarding challenges faced by surveyed suppliers:
-- 34 percent said price competition was their biggest concern;
-- 25 percent cited higher labor and raw material costs as a critical issue, and;
-- Also noted were fewer orders due to unstable economic conditions, trade protectionism and labor shortage.

Global Sources market analysts interviewed 551 China exporters from the telecom, home products, fashion accessories, garments, textiles, hardware, sports equipment and security products sectors in January and February 2010. Nearly half of respondents are based in Guangdong province, about one-third are from Zhejiang and 9 percent from Fujian.

Source: Global Sources

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