By Ellen Zhang and David Kirton
GUANGZHOU, China (Reuters) – China’s Wu Huazhan television factory used to impose minimum orders to manage production efficiently. Times are so bleak now that every order is needed.
Foshan Top Winning Import & Export’s profit margin has fallen to a razor-thin 0.5%, down from 2% about three to four years ago, according to Wu, co-owner of the Guangdong-based factory and one of several exporters who are concerned about things. prospects at China’s largest trade fair in the southern city of Guangzhou.
“We sell electrical appliances as cheap as coal,” he added. “If it continues for another year or two, we will have to change careers.”
The somber mood at the twice-yearly Canton Fair was little improved by data on Tuesday showing the world’s second-largest economy grew by a faster-than-expected 5.3% in the first quarter.
A sharp contraction in Chinese exports in dollar terms in March, despite volume growth, and data showing producer prices continuing a year-and-a-half decline have dampened hopes that China is on track for sustainable post-pandemic growth.
Chinese exporters are facing heightened economic and political tensions between Beijing and Washington, as well as a slowdown in global trade due to the war in Ukraine and a worsening crisis in the Middle East. The manufacturing sector is also plagued by overcapacity.
In an encouraging sign, the number of foreign buyers visiting the fair on Monday and Tuesday rose by around a fifth from the first two days of the last one in October, according to organisers.
But some attendees said things felt slower.
“Last year, I received more than a dozen inquiries on the first day, but today I received only three business cards,” said Lois Zhang, sales manager at Enping City Shuangyi Electronics Industrial, which produces speakers and microphones.
A manager at an outdoor heater manufacturer in Jiangsu province said he didn’t have much hope for its European and North American markets, where most of his customers are located.
“One of our major customers’ orders this year was 25% lower than last year and other customers have yet to decide whether to continue placing orders,” said Fan, who asked that only his last name be used so he could discuss matters openly to talk. prospects.
Fan said his customers were still destocking and he hoped their orders would increase later this year.
The potential for further trade tensions with the United States and Europe is also a major concern. Former US President Donald Trump has threatened 60% tariffs on Chinese imports if he defeats incumbent Joe Biden in the upcoming elections.
“Whether it is Biden or Trump, there is a real sense of instability,” said Pan Feng, sales manager at dryer manufacturer Jiangmen Jinhuan Electrical.
In particular, U.S. and European officials have increased complaints that China’s strategic drive to strengthen and upgrade its manufacturing complex is exacerbating industrial overcapacity and driving prices down to levels that other economies cannot compete with.
However, some high-tech manufacturers at the fair were more optimistic.
Xiao Yanmei, general manager of Guangdong Doni Intelligent Robot Engineering, which makes self-navigating machines that disinfect factory floors or distribute parts to assembly lines, said her company grew 10-20% in the first quarter.
Xiao said government support for the advanced manufacturing sector was strong, including tax breaks and funds for equipment upgrades.
“If our country channels its national strength to develop an industry, the forces can be very powerful,” she said.
(Reporting by Ellen Zhang and David Kirton; Writing by Marius Zaharia; Editing by Edwina Gibbs)
