The 135th China Import and Export Fair (Canton Fair) is currently being held in Guangzhou, with more exhibitors participating compared to last year. However, in order to secure orders, many manufacturers are engaging in intense price wars, leading to millions of yuan in losses.
The current session of the Canton Fair is taking place from April 15th to May 5th in Guangzhou. Companies participating in the fair have expressed concerns over the escalating price wars despite an increase in order volume compared to previous years.
The head of a company specializing in gearboxes told Caixin that the price wars within the industry have become fierce. She said, “If we don’t join the price war, we can only watch as customers place orders elsewhere, and we may not even be able to sustain our workforce. But if we do join the price war, our calculations suggest we could lose around $1 million a year.” She added that under this pressure, some competitors have resorted to cutting corners in production.
An anonymous exhibitor commented, “For products with little technological differentiation, companies can only compete on price.” Businesses are forced to sell their products at cost pricing, especially with the soaring prices of raw materials like copper further squeezing factory profits.
He mentioned that small and medium-sized enterprises often lack the capability to hedge against raw material price fluctuations, usually buying materials after securing orders. However, it is common for micro-enterprises to be the first casualties in these price wars.
In the foreign trade industry, many Chinese sectors are facing the dilemma of “increasing quantity, decreasing prices.” Data from the China Chamber of Commerce for Import and Export of Minerals and Chemicals reveals that in the first two months of 2024, China’s steel exports increased by 32.6% to 15.91 million tons compared to the previous year. However, the average unit price dropped by 32.1%, resulting in a 10% year-on-year decrease in steel export value to $12.6 billion. Additionally, the average export unit price of finished oil decreased by 5.3% year-on-year, while the export unit prices of unwrought aluminum and aluminum materials dropped by 8.6% and 2.4%, respectively.
The China Chamber of Commerce for Import and Export of Light Industrial Products and Arts and Crafts stated that global economic growth momentum is insufficient, with ongoing external demand pressures. Geopolitical conflicts are intensifying, leading to more trade frictions. The complexity and uncertainty of the external environment are increasing, while global industrial chains and supply chains continue to restructure, with visible trends of industry shifts and order outflows, making the task of steady export growth in light industry trade challenging.
Additionally, according to a report by Reuters, Chen Zhiwu, a professor of finance at the University of Hong Kong’s Business School, stated that the keyword for this year’s Canton Fair is “low prices,” whether for high-tech or low-tech products. This is attributed to relatively low domestic demand in China, resulting in overcapacity in most industries, prompting manufacturers to reduce prices to boost exports.