GUANGZHOU (Reuters) – Chinese exporters showcasing their products at the country’s largest trade fair said a weak global economy is hurting their business, with many investments frozen and some labor cost cuts in response.
The sour mood at the Canton Fair in the southern city of Guangzhou suggests that China’s unexpected jump in exports in March may have reflected exporters catching up with orders delayed last year due to COVID restrictions rather than renewed economic strength.
The first major trade event since China abruptly dropped coronavirus restrictions and reopened its borders comes as borrowing costs have risen sharply in the United States and Europe hitting demand for goods made in China.
Chris Lin, a representative of Taizhou Hangjie Lamps, a producer of Christmas lights, said orders for this year have so far fallen 30% from last year.
“Last year’s difficulties came from logistics and production disruptions, but the local government helped solve the problems. This is an internal problem. Now we have external problems. We can’t solve it,” Lin said.
“This year will be the most difficult for us,” he said, as rising electricity costs due to the war in Ukraine reduced demand for his decorations even further.
Lin said the company cannot sell for lower prices, but it may seek to reduce labor costs. The company relies on contract workers who are released in September-October after Christmas orders are delivered.
“If the orders are weak this year, I will release the workers earlier.”
Huang Qinqin, sales director of Zhong Shan Shi Limaton Electronics, a producer of exhaust fans, has similar thoughts on cutting costs after orders halved in the first quarter.
“In our factory, workers come to work when there are orders,” Huang said. This has meant working overtime even on weekends, she said, but it is more common this year for workers to take the weekend off.
A razor producer from the eastern city of Ningbo, who asked not to be identified to reveal future plans, said the company has already laid off workers and will cut prices in the coming months if orders don’t improve.
The worsening outlook for manufacturing workers will worry policymakers, who target 12 million new jobs across China this year, up from last year’s target of 11 million.
Dozens of Chinese suppliers told Reuters they do not plan to spend a lot on improving production lines this year, given weak demand.
“We don’t have a plan to increase the investment,” said Luna Ho, a sales representative for Topgrill, which makes outdoor grills and slashed prices by 5% to attract buyers.
Vicki Chen, director of foreign trade at socket producer Qinjia Electric, said she did not expect a big increase in sales at the fair, which runs through May 5th.
“The whole world economy is doing badly right now, and the show isn’t going to change that.”
Elaine Zhang; David Kirton; Written by Marius Zaharia. Edited by Tom Hogg
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