Chinese exporters expect slow business for 6 months

Light bulbs on display at a booth during the Canton Fair in Guangzhou on Thursday. The fair gathers tens of thousands of Chinese exporters and foreign buyers in one place and has been regarded as an indicator of how well the Chinese economy is doing.
Light bulbs on display at a booth during the Canton Fair in Guangzhou on Thursday. The fair gathers tens of thousands of Chinese exporters and foreign buyers in one place and has been regarded as an indicator of how well the Chinese economy is doing.PHOTO: REUTERS

GUANGZHOU • Around two-thirds of exporters at China's largest trade fair expect the slowdown in their markets to persist for at least six months, with the country expected to announce its weakest economic growth in decades early next week.

Many economists expect data to be released on Monday to show that China's third-quarter gross domestic product dipped below 7 per cent, the slowest rate since the global financial crisis.

A weak showing could possibly prompt Beijing to take more steps to stimulate its economy.

In the booth-filled halls of the biannual Canton Fair on the banks of the Pearl River this week, a Reuters opinion poll of 103 mostly small to medium-sized Chinese manufacturers found that they expected orders to rise by an average of 1.83 per cent this year, though production costs were expected to rise 5.6 per cent in the coming 12 months.

"I feel great pressure right now," said Mr Kelvin Qiu, manager of a factory making heaters and radiators based in north-eastern China. "I have around 40 per cent fewer customers than before and the fair is quieter," he said, comparing activity during the previous Canton Fair in April.

The Canton Fair draws tens of thousands of Chinese exporters and foreign buyers into one gargantuan venue and has long been regarded as a barometer for an economy that has been the world's biggest exporter since 2009.

The poll's results reflect a gathering pessimism in the export sector, a major driver of the world's second-largest economy. A similar Reuters survey in April had been more bullish, as it showed expectations that orders would rise 3.1 per cent.

Exports, however, fell 5.5 per cent in August and 3.7 per cent last month, reflecting anaemic global demand for China-made goods.

Thirty-six per cent of exporters polled said they expected a fresh wave of factory closures.

Thirty-six per cent also said they expected an export rebound within six months, though 32 per cent said the export slowdown would persist for more than one year, given continued weakness in core markets such as Europe and the United States.

Since the previous Canton Fair, China's stock market crash and surprise currency depreciation have clouded the economic outlook, with Beijing taking a series of desperate measures - including interest rate cuts and ramped-up fiscal spending - to galvanise growth. Its efforts have had limited success so far.

China's dominance as an exporter has been undermined by its previously strengthening currency, soaring labour costs and a strategic shift by the authorities to move away from an excessive reliance on exports to domestic consumption.

A mild devaluation of the yuan in August was seen by some Chinese exporters as providing some respite, as their price competitiveness had eroded over the past few years.

Many exporters at the fair said they hoped the yuan would weaken further from the current 6.34 per US dollar level. Exporters polled said they would start to lose money if the yuan recovered again to 6.1 per US dollar.

Meanwhile, a fresh survey of economists showed that China's output probably rose by an annual 6.8 per cent in the July-September period - the worst since early 2009. The actual figures will be out on Monday.

Given weak global demand, some foreign buyers at the fair said they were able to squeeze lower prices from Chinese factories. The poll showed that 65 per cent of exporters cut their prices this year, by an average of 4.6 per cent, to keep the orders flowing and business ticking over.

REUTERS

A version of this article appeared in the print edition of The Straits Times on October 17, 2015, with the headline 'Chinese exporters expect slow business for 6 months'. Print Edition | Subscribe