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Canton Fair no longer 'silver bullet' for winning orders [China Daily: US Edition]
[April 25, 2014]

Canton Fair no longer 'silver bullet' for winning orders [China Daily: US Edition]


(China Daily: US Edition Via Acquire Media NewsEdge) Exporters are battling weak demand and technological hurdles, He Wei reports from Guangzhou Gao Qiang had finished two packs of cigarettes before getting his first business card, from a Saudi Arabian buyer, at the Canton Fair, China's largest international trade event.



Gao, general manager of electronic toolmaker Wilon Tools Manufacturing Co Ltd in Nanjing, Jiangsu province, had not inked any deals on the fair's grand opening day, which would have been unthinkable five years ago.

"You expected a contract worth about $500,000 or even $1 million to be signed on the first day. You simply cannot get that now," said Gao, as he sipped coffee and gazed out at crowds that seemed much thinner than in previous years.


Weak demand and political turbulence have dampened Gao's export business to Thailand and Ukraine, with first-quarter orders slashed by half.

"Honestly, we don't expect the trend to be reversed simply by attending the exhibition," he said.

Chinese exporters have long sought to get more customers by taking part in the government-backed China Import and Export Fair in Guangzhou, Guangdong province. But many are learning not to count on the event as a silver bullet for sales recovery.

The latest figures from the fair show that the exhibition is facing economic headwinds. The first phase of the 115th Canton Fair, held from April 15-19, attracted 101,198 foreign buyers. While slightly up from the autumn session, that number failed to match up to last year's spring session, and was mainly dragged down by a slump among European merchants, which have traditionally constituted a large share of buyers.

So Gao has seized every opportunity to salvage sales, including introducing some updated products.

Among those products, a handheld drill powered by a lithium battery rather than alternate current is starting to bear fruit. Gross profits were up by 25 percent, as opposed to 3 to 5 percent among the older ones.

"It's heartening to see a pickup in demand," he said.

In general, higher-value Chinese exporters are finding themselves more immune than low-cost manufacturers from such things as weak demand, exchange-rate fluctuations and rising costs.

Bigger companies are feeling more confident in targeting businesses with expertise in specialized components and high-tech materials, fields where US and European companies normally occupy strong positions.

China's leading flat-screen TV maker Skyworth Group is banking on a so-called "OLED four-color display" to take overseas sales to new heights, said sales director Zhou Qi.

The technology, which allows a wider angle of view with a thinner display, can boast 10 percent or higher profit margins than traditional television sets, a cornerstone for better penetration to leading markets such as the US and the European Union.

Guangdong-based appliances provider Galanz Group is making forays into Bluetooth-enabled microwave ovens as part of its strategy to enter US households.

"One may find one Galanz microwave in every three US families. We are not just making it big, we are making it fabulous," said Wang Changyin, general manager of Galanz who oversees home appliances business units.

To achieve that goal, Galanz has introduced 52 automated production lines, which have enhanced productivity by 2 percent.

Given the mature IT infrastructure in developed markets, Galanz has come up with the idea to make all microwave ovens interconnected by Bluetooth so they can be deployed as masters to control the transmitting power levels of all other Bluetooth communication units in the vicinity.

Consistent with the government's strategy to move up the value chain and improve the industrial structure, China's small-cap firms, mostly low value-added manufacturers, are pushing themselves to upgrade in a bid to weather the economic storm.

Guangdong Jinli Electrical Appliance Co Ltd, which mass-produces lamp switches, is repositioning itself in the LED sector after being hard-hit by the current trade deficit.

"We have been bleeding money to combat an inflating yuan and constantly rocketing expenditures, which have surged almost 20 percent in the past two years," said Zhang Yingli, head of international sales.

To that end, she said the firm is busily diverting its focus from switches, whose gross profit barely hits one yuan each, to the more lucrative LED lighting segment.

Chinese exporters have also apparently lost out to Association of Southeast Asian Nations markets such as Cambodia and Vietnam in terms of costs, said Hassan Ali Mousa, an Egyptian construction tool vendor who was visiting the fair.

"Competition in basic machinery has been fierce, notably in the past two years, between China and India," he said. "I will look to buy from India since (its products are) almost half the price of Chinese ones." But even high-profile companies such as Galanz have failed to translate its high market share into high revenue. An item produced by South Korea's Cuckoo Electronics Co Ltd was priced 10 times higher than Galanz but still was winning buzz from European buyers, said Joshua Ku, assistant manager of Cuckoo's overseas business team.

"When they hear 'made in Korea', merchants don't even bother to bargain for a price. They take it as a guarantee for quality, and that's the edge we have over Chinese companies," Ku said.

Such a dilemma is pushing Chinese exporters to put down roots overseas rather than just rely on exports, said Chen Qiuru, deputy general manager of the China Foreign Trade Center.

"China-based companies will seek wider profit margins built on their ability to sell desirable, high-specification products rather than simply offering the best value for the money," Chen said.

From the standpoint of individual companies, the basic lesson is clear: Don't be complacent, said Dan Steinbock, research director of international business at the US-based India, China and America Institute.

But such ambition is being constrained by a lack of core competence or new technology, the Achilles' heel facing almost every small and medium-sized enterprise.

"It's easy to come up with the slogan 'move up the value chain', but how much cost can SMEs bear before we can acquire world-class technologies?" asked Xu Xudong, manager of Nanjing Technology Import and Export Co Ltd.

Other Asian countries can offer many success stories for China to learn from, Steinbock noted.

"But it has gone hand in hand with substantial economic, political and social changes. In each case, established interests have sought to fight or slow down reforms, but at the end of the day, the most competitive and innovative companies have prevailed, which, in turn, has benefited the consumers," he said.

Contact the writer at [email protected] (China Daily USA 04/25/2014 page17) (c) 2014 China Daily Information Company. All Rights Reserved. Provided by Syndigate.info, an Albawaba.com company

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