Weak demand and fluctuations in exchange rate hurt manufacturers
Higher-value Chinese exporters are more immune than low-cost manufacturers in the face of market turmoil from such things as weak demand, exchange-rate fluctuations and rising costs, said exhibitors at the Canton Fair that opened on Tuesday.
Shenzhen-based Yekalon Industry Inc, an exporter of home decoration goods to more than 200 clients, saw sales rise 20 percent in the first quarter, Vice-President Wang Lili said. That goes against China's national trade figures last week that showed imports and exports declining.
Wang attributed his company's growth to a "separation, gap and warp resistant technology" applied on wooden floors, which finally bore fruit after three years of research and development.
"Each year a wave of European buyers would rush to our plants after they saw exhibits at the fair. Since only three companies globally can master such techniques, we have a bigger say in pricing despite the continued strengthening of the yuan," Wang said.
More Chinese firms are targeting businesses with expertise in specialized components and high-tech materials, fields in which US and European companies are normally strong.
The "OLED four-color display concept" is set to take foreign sales of Chinese panel TV maker Skyworth to new heights, Sales Director Zhou Qi said.
"The OLED technology, which allows a wider angle of view with a thinner display, is the best manifestation of our R& D capabilities and helps us retain stable customer flow," he said.
He was confident the firm's overseas revenue will rise to 5 billion yuan ($810 million) in 2014 from some 3 billion yuan a year ago. Surging costs will be mostly offset by the launch of new products, which usually boast a 10 percent or more profit margin than traditional TV sets, Zhou said.
Some small-cap firms, mostly low value-added manufacturers haven't weathered the storm.
"While first quarter sales barely leveled off last year, growth of new orders is stagnant and we are pessimistic about the rest of the year," said Zhang Yingli, head of international sales at Guangdong Jinli Electrical Appliance Co Ltd. The company mass produces lamp switches.
She said the firm has been bleeding money to combat rocketing expenditure, which surged almost 20 percent in the past two years. An inflating yuan also brought losses.
"It's cheering to see a temporary yuan depreciation nowadays. But, in the long run, we will struggle to restructure to the more lucrative LED lighting segment," she said.
Manufacturers in the Pearl River Delta, a major trade base in South China, have to turn to e-commerce and launch new products to offset first-quarter losses.
Zeng Zhaoyang, a manager in Guangdong Hopeful Electronic Co's trade department, said new varieties of energy-saving and environmentally friendly products had to be developed to mitigate the impact of weaker overseas demand.
"Our new electronic fans, for instance, could help reduce electricity by up to 50 percent, compared with other similar products," said Zeng, who noted the company's sales dropped about 10 percent year-on-year in the first quarter.
The company, based in the manufacturing city of Foshan, also reported a more than 10 percent year-on-year drop in profit last year because of increased labor and production costs and the rising value of the yuan, Zeng said.
"We also began to sell products online. Hopefully, the e-commerce will help attract more domestic and overseas buyers in the near future," Zeng said.