May 08,2009

Canton Fair Fares Unwell: Export Decline Continuing

By CSC staff, Shanghai
The Canton (Guangzhou) Trade Fair, long regarded as an important weather vane for China’s foreign trade, this year faced bitter, cold winds. The 105th holding of the fair, a semi-annual event that lasted 23 days this time, concluded yesterday. Trade volume of main export products such as machines and light industrial products all saw a decline, although the degree of decline differed in different sectors. The total trade volume in this Canton Fair dropped 16.9% below the previous one.

Wen Zhongliang, vice-director of the Department of Foreign Trade of the Ministry of Commerce (MoC) and director of the business department of the Canton Fair, commented, "China’s exports will continue to decline short-term, and will hover at the bottom in this year’s second and third quarter, but the decline will be slower than in the previous months." A rebound is "expected to occur in the fourth quarter," he added.

Many export-oriented companies had hoped to improve their business with orders from the Canton Fair, but the global financial crisis and the unfortunate coincidence of the international spread the H1N1 (swine) flu saw both the number of buyers and trading volume drop below expectations.   

165,436 overseas buyers from 209 countries and regions attended the fair, 5.2%, or 9136 people, below the previous fair’s total. Trading during the fair totaled $26.23 billion, down 16.9%. Only the trading of some single varieties of goods saw an increase.

Trading in machinery products totaled $11.26 billion, a drop of 19.5%, accounted for 42.9% of the total trading volume. Trading volume of light industrial and textile products totaled $8.37 billion and $3.23 billion, respectively, down 15.3% and 11.7%, while that of food and shoes totaled $410 million and $550 million, both up slightly. Trading in medical equipment reached $220 million, a rise of 34.7%.  

At the 104th Canton Fair last fall, numbers of buyers and trading volume dropped 9.1% and 17.5%, respectively, marking the beginning of the negative growth in China’s foreign trade. In the first quarter of this year, China’s imports and exports totaled $428.74 billion, down 24.9%, year on year.

Zhou Shijian, executive director of the China Association of International Trade, says the low trading volume at the Canton Fairs shows that China’s exports are unlikely to see positive growth in the first half of this year and the government should take more drastic measures to safeguard markets, firms, and employment. A release of a series of policies including again lifting the export tax rebate is expected.  

To help exporters, the MoC for the first time allowed domestic buyers to attend the fair.

Those attending the fair commonly reported that international buyers were more cautious and were reducing the number of orders and cutting delivery terms and prices. Mid- and low-end products with lower prices and sound quality were more popular than high-end ones.  

Wang Yu, vice-chairman of China Chamber of Commerce for Textiles Import and Export, said the decline of orders had accelerated the competition within the industry, and those focusing only on prices instead of quality are more easily eliminated. Meanwhile, he reminded firms to pay attention to possible trade disputes due to low prices.

China’s machinery products favored by international buyers were mainly low priced small electrical appliances and high tech or environmentally friendly high-end products. Chinese machinery exporters are trying to persuade the government to lift the export tax rebate ratio so they can invest more profits in R&D and technical improvement. 

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