The China Import and Export Fair, commonly known as the Canton Fair, opened in Guangzhou on April 15. Due to the bleak Chinese economy and overcapacity, some exporters expressed that their products are priced so low it feels like selling cabbages, leaving them feeling hopeless.
According to a report by Reuters on April 17, Wu Zhanhua, who runs a Chinese television factory, used to set minimum order quantities to effectively manage production. But in the current dismal market, any order is considered good.
At the fair, Wu Zhanhua mentioned that the profit margin of Foshan Top Winning Import & Export, a company he partners with, has dropped from around 2% three to four years ago to a meager 0.5% now. He is among many exporters worried about their business prospects.
“Our electronics are as cheap as cabbages,” he added. “If this situation continues for another year or two, we will have to change our line of work.”
The latest data shows a significant decline in China’s imports and exports in March, below expectations. According to data released by the General Administration of Customs of China on April 12, China’s total import and export value in the first quarter was $1.4313 trillion, a 1.5% increase from the same period last year. Exports in March totaled $500.81 billion, a 7.5% year-on-year decline, the largest drop since August last year, with a 14.6 percentage point decrease from the previous two months; imports fell by 1.9% year-on-year, a 5.4 percentage point decrease. The dismal import-export data has weakened hopes for sustained economic growth in China post-pandemic.
Due to China’s overcapacity, particularly lower-tech manufacturers engaging in price wars to grab market share, product prices continue to plummet, putting factories in a prolonged struggle with deflation. The Canton Fair currently underway is filled with a sense of gloom.
On the flip side, this also signifies that Chinese companies’ pricing power domestically and internationally is waning, with increased pressure on profit margins. More details will be revealed in the March industrial financial data set to be released later this April.
Prior to the Canton Fair, Professor Chan Chi Wai from the Faculty of Business and Economics at the University of Hong Kong told Reuters that the keyword for this year’s fair will be “low prices.” “Due to significantly lower domestic demand for goods in China and severe overcapacity in most industries, manufacturers must lower prices to boost exports,” he remarked.
Chinese exporters also have to navigate the escalating economic and political tensions between the US and China, as well as the global trade slowdown caused by the war in Ukraine and the worsening Middle East crisis.
Some attendees have noted a slowdown in business. “On the first day of the fair last year, I received inquiries from more than ten customers, but today I only got three business cards,” said Lois Zhang, Sales Manager at Enping Shuangyi Electronics, a manufacturer of speakers and microphones.
The manager of an outdoor heater manufacturer in Jiangsu Province expressed little hope for the European and North American markets, as most of his clients are concentrated there.
“Our largest customer’s orders have decreased by 25% compared to last year, and other clients have yet to decide whether to place new orders,” Mr. Fan, who only disclosed his surname, shared.
Mr. Fan mentioned that his clients are still reducing inventory, and he hopes that their orders will increase later this year.
The escalating trade tensions between China, the US, and Europe are also major concerns. Former US President Trump has indicated that if he returns to the White House, he will impose a 60% tariff on Chinese imports.
“Whether it’s Biden or Trump, it gives a sense of instability,” said Pan Feng, Sales Manager at Jin Huan Electronics, a manufacturer of drum dryers.
Furthermore, countries like the US and European allies have expressed concerns about China’s enhanced and upgraded strategic measures in the manufacturing sector, exacerbating industrial overcapacity and driving prices down to levels where other economies cannot compete.
Janet Yellen, the US Treasury Secretary, stated on CNN on April 15 that the US does not rule out “any measures” against China’s overcapacity, including possible tariffs, aimed at preventing a flood of cheap Chinese goods into the US market.
G7 allies like Canada, France, and Germany have also voiced worries about China’s exports. Brazilian President Lula has expressed concern and recently initiated a series of investigations into alleged dumping of industrial products like steel.
Responsibility Editor: Ye Ziwei#