Chinese manufacturers were disappointed to see a decline in the number of buyers from Europe and the United States in this week’s Canton Fair, the largest trade show in China, as Western demand was hit by high inflation and interest rate hikes.
Some exporters complained that they paid higher booth fees but were approached by fewer European buyers and almost no new US customers. They said they saw more buyers from Latin America, Africa, Southeast Asia and Russia but these customers may provide lower margins.
An analysis put forth by Chinese commentators is that some Western companies try to place orders with factories in other emerging world countries such as India and Vietnam, instead of China, as they don’t want to be affected by the intensifying Sino-US decoupling.
Since 1957, it’s been the policy of China’s Ministry of Commerce and the Guangdong government to hold two sessions per year of the Canton Fair (or, more formally, China Import and Export Fair), in Guangzhou. This year’s spring session, between April 15 and May 5, covers an exhibition area of 1.5 million square meters, compared with 1.19 million square meters for the pre-pandemic fall session in 2019.
As all six sessions of exhibitions in 2020-2022 had been held online, many Chinese manufacturers had high hopes that they would meet their long-term foreign customers face-to-face again at this Canton Fair. But many Westerners did not show up for reasons that included not only political concerns but high costs for travel, accommodation and visas.
“Over the past few years, foreign orders for our products have significantly dropped due to the pandemic,” Li Mingyang, general manager at Letu Electrical Appliance, a Zhongshan-based manufacturer, told Yicai.com.
“About 85% of our orders came from US customers but some of them have turned to placing their orders in Vietnam, Indonesia, Thailand and Mexico as they are worried that the global supply chain will be affected by changes in international relations,” Li said.
“Exports of Chinese home appliances have remained weak since the second half of last year, especially to Europe and the US,” said Chen Haibin, a sales manager at Guangdong Galanz Enterprises. “The trend continued in the first quarter.”
Chen said there were more customers coming from Southeast Asia, the Middle East and South America, as well as Russia, but fewer from Europe and the US, at this week’s Canton Fair.
Buying intent on the wane
Organizers said 370,000 people entered the venue on April 15, the first day of the Canton Fair, about 67,000 of them foreigners. They said 410,000 people joined the event over the Internet.
The last comparable data was released in the fall session in 2016 when 167,000 people entered the venue on the first day.
Wu Xiaobo, a Zhejiang-based columnist, says some exhibitors complained that the organizers lowered the entry fee to boost the number of visitors but failed to manage the flow of people at the entrance. Wu says some Western buyers could not show up as they found it difficult to get visas and air tickets to visit China.
He says it was not unusual for a small manufacturer to report having been approached by only three to six new customers who displayed buying intent during the first two days of the current exhibition, compared with a dozen to 20 similarly eager customers in the fall session in 2019.
He says European and US buyers are less active than those from other regions as demand from developed countries has been hit by high inflation while some customers have concerns about the Sino-US decoupling.
In late February, the US commerce department’s Bureau of Industry and Security (BIS) sanctioned five Chinese companies and accused them of providing services and products to the Russian military. Among them, the Hong Kong-based AOOK Technology sells electronic parts such as integrated circuits, transistors, diodes and capacitors.
On April 12, the BIS sanctioned 12 Chinese firms for shipments to Russia. Most of them are Shenzhen-based firms that sell integrated circuits, capacitors and memory chips. Some Western firms try to place orders elsewhere as they don’t know whether their Chinese suppliers will be sanctioned one day, said some commentators.
Trade figures
In fact, the phenomenon seen at the current Canton Fair bears out what we can see from China’s overall trade figures. In the first quarter, China’s exports to the European Union fell 7.1% year-on-year while exports to the US dropped 17%, according to the dollar-denominated figures released by the General Administration of Customs on April 13.
The decline was largely offset by the increase in exports to ASEAN countries (+18.6%), Africa (+19.3%) and Russia (+47.1%).
China’s total exports grew 0.5% to US$821 billion during the first quarter from a year ago. If denominated in renminbi, the growth rate was 8.4% for the period as the Chinese currency depreciated.
“China’s export growth rebounded to 14.5% year-on-year in March, beating market expectation of a 5% decrease,” Zhu Chaoping, a Shanghai-based global market strategist at JP Morgan Asset Management, said in a research note on Tuesday. “However, when demands from developed economies moderate, export growth may dip again.”
Lu Daliang, a spokesperson for the General Administration of Customs, said last month that China’s external trade will continue to suffer from weak demand in the West and geopolitical conflicts for the rest of this year. But he added that China still enjoys a strong advantage in the exports of its electric vehicles, lithium batteries and solar energy products.
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