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China's export far from recovery despite orders surge, analysts say
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08:19, September 14, 2009

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A recent orders increase in many Chinese export-oriented companies combining a slower downward rate in the country's foreign trade figures added to signs that the dwindling export has scraped bottom amid the shrinking global economy, but analysts were not so optimistic about full recovery in the short term.

They attributed orders increase to temporary seasonal factors, such as Christmas consumption, saying a full-fledged export revival would hinge on a real growth of the world's economy.

Manufacturers attending the 13th China International Trade and Investment Fair that closed on Sept. 10 in China's east coastal city Xiamen, Fujian Province, said they had undergone the worst time and were on track for a gradual recovery as overseas orders leaped in recent months.

"Sales in the first half of this year had rebounded to the level a year earlier after the company took orders of 7 million pairs of slippers from Wal-Mart in May," Zheng Guozhang, general manager of Baofeng Foreign Trade Co. Ltd, a Fujian-based slippers manufacturer with an annual output of 25 million pairs, said Sunday after returning from the trade fair.

Zheng also believed his company would receive more overseas orders in the second half year as inventories declined in the first half and the foreign importers would increase stockpiles.

Meanwhile, previous media reports said orders surge has caused a shortfall in labor resources in factories in China's eastern and southern coastal regions including the Pearl River Delta and Yangtze River Delta regions, the country's major manufacturing bases.

"The current order rise may be a combined result of a Christmas demand, and a rapid progress in unwinding excessive inventories in the overseas market," Li Wenpu, deputy head with the Economic School of Xiamen University, said Sunday.

The looming Christmas has driven the demand for present-related products, bringing a revival to relative industries. However, a meaningful recovery in the country's export depends on a solid growth in the world's economy and would crop up in the first half next year, according to Li.

NIGHTMARE HARDSHIPS

Many Chinese manufacturers have been struggling at the profits bottom or even operating below the break-even point after last October's financial tsunami dragged the world's economy into a steep contraction.

"As daily necessities, overseas demand for slippers is usually stable. But exports value in the second half of last year slumped by 20 percent due to a weak market demand," said Zheng.

Lai Guanghui, manager of a Guangdong-based garment company, has been trying to stave off bankruptcy by lowering the minimum requirement for each order from 3,000 items to 1,000 items in March, because he believes "the company will make money sooner or later as long as the business keeps on going."

The same nightmare also fell on Xiao Xinrong, general manager of a Fujian-based umbrella company, who complained profits have dropped more than 30 percent in the first half of this year from a year earlier. "We have sold at a loss in order to maintain business ties with our regular clients in East Asia," said Xiao.

Data from the General Administration of Customs (GAOC) on Sept.11 showed, from January to August, the country's imports and exports totaled 1.34 trillion U.S. dollars, down 22.4 percent compared with the same period last year.

Export values in garment, textile and white ware sectors in the first eight months dropped 10.4 percent, 14.9 percent, and 20.6 percent, respectively.

"Half of the machines were laid off in February and 40 percent of workers were dismissed," said Xiao.

POSITIVE SIGNS

Although August's export figures look still grave, they were showing signs of improvement.

Data from the GAOC showed, exports dropped 23.4 percent in August from a year earlier to 103.7 billion U.S. dollars but their value rose 1 percent from July. As of the end of August, the pace of annual falls in exports had slowed for six straight months after a 25.7 percent tumble in February.

The GAOC said exports of labor-intensive products witnessed a slower rate of decline compared with other goods categories.

Exports in several mechanical and electrical producers in southeastern regions are also making a turn for the better. Xiamen Overseas Chinese Electronic Co., one of the country's largest television producers, prepares to add two production lines this year as overseas orders piles up.

"The world's market has been in a rapid progress in unwinding of excess inventories in the first half year. Foreign importers will increase stockpiles, which offers a good chance to Chinese exporters, " said Li Wenpu.

CAUTIOUS JUDGEMENT

Data released August 24 by the World Trade Organization showed, China surpassed Germany in the first half of the year to become the world's largest exporter.

Li elaborated it as a result of "potato rule", which means the customers transfer from high-end products to medium and low level products, thus leads to increase of demand of the latter.

A revival in demand in major Western markets is the decisive factor for a strong rebound in China's export.

According to the U.S. Institute for Supply Management data released on Aug. 31, August Chicago Purchasing Managers Index rose for the third month in a row to 50, the highest reading since September 2008. Confidence among U.S. consumers was reported to rise more than forecast in September as the economy showed signs of pulling out.

"It may lay a foundation for a rebound in China's export, but it is unlikely for the country's exporters to see recovery in months to come. Meanwhile, it is also hard for China to resume the export level before the global downturn as western countries may fix their consumption patterns after pulling through the recession," said Li.

PROTECTIONISM OBSTACLES

China has become a major target of trade remedy measures launched by many economic powers since late last year, which posed a big threat to the country's exports.

The U.S. President Barack Obama decided to impose a tariff on tires imported from China on Sept. 11, which will begin with a 35-percent duty the first year and decrease to 30 percent the second year and 25 percent the third year on passenger vehicle and light-truck tires from China.

China's Minister of Commerce Chen Deming said on Sept. 12 that the U.S. decision was grave trade protectionism and sent a wrong signal to the world.

The E.U. launched anti-dumping investigation on imported Chinese aluminum alloy hub products on Aug. 13, bringing 390 million U.S. dollars economic losses to more than 60 Chinese exporters.

Lu Xiankun, a Chinese counselor to the WTO, said trade protectionism has gained upward momentum in the wake of the global economic recession, and has exerted adverse effects on Chinese exporters.

Source:Xinhua



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