Chinese exporters feel global pressure

By Jeremy Hillman
Editor, BBC Economics and Business Centre, in Shanghai

Attendances are well down at the East China Trade Fair this year.

As managing director of the Goodtime Clock Company, John Wu employs 400 people making grandfather clocks at his factory in Shandong in eastern China.

But this week he has plenty of time on his hands as he waits for customers at his stall at the country's largest regional trade fair.

He is one of more than 5,000 exhibitors to have set up stall at the Shanghai New International Expo Center - hopeful of touting his goods to would-be buyers.

And like many others, Mr Wu is facing tough challenges after the global recession tripped up what seemed - just a year ago - to be the unstoppable momentum of China's economic powerhouse.

"We are having problems selling my clocks right now," he admits.

"We are searching for new markets in Africa and north Africa and I am trying to keep my prices low to my old customers in the US."

Savage hit

The truth is that China is undergoing a dramatic slump in exports.

The global financial crisis has prompted a fall in Chinese exports - down by 17.5% year-on-year in January, with many of the manufacturers of low-tech, low-margin goods of the sort on display here, being most savagely hit.

Meanwhile imports were down by 43% - as recessions in key markets in Europe and the US stifled demand.

Already thousands of factories have closed in southern China, and millions have lost their jobs.

In the last month we have had only two or three orders from America, and the price they were offering has gone down and down Lin Shufen

It is leading to a mass migration of workers away from the towns and cities back to the rural areas which they had originally left to find work.

And there are growing fears of more serious social unrest, as economic growth falls below the rate at which even higher levels of unemployment can be prevented.

'Struggle'

It seems the trouble is that whilst many Chinese businesses have been built on cheap, commoditised goods, other countries can now do this - sometimes even more cheaply.

It is an increasingly familiar tale to Jason Basso, who runs a company exporting from China to the US.

The trade show is usually packed with Americans, Europeans and Australians - but as one of the few western faces here this year, he is putting a brave face on the current situation.

"Some of our lower margin items have been mainly in the textile arena which is tending to be a struggle," he says.

"We're also competing with countries like Bangladesh, India, Vietnam so we have to be creative".

Innovation needed

Sales at this year's Shanghai fair are down 20% so far.

Many exhibitors are having a quiet time of it

Lin Shufen represents a toy company that has seen a steep and sudden fall in sales.

"The last three years were very good but now our orders are less and less.

"In the last month we have had only two or three orders from America, and the price they were offering has gone down and down".

Many believe that for China to build sustainable growth, it needs to move to higher margin, better quality and more innovative types of products, and also to build more powerful Chinese brands.

Xiongwen Lu, dean of the School of Management at Fudan University agrees wholeheartedly but says it is not such a simple task.

"It's not easy, it takes time. You need to develop your own technology and know-how but there's a cultural element too. Consumers need to trust you."