For Li Qi, an international trade veteran, this spring's Canton Fair was a flop. "Thehigh-quality clients I met were far fewer than last year. The clients also drove hardbargains," said the salesman with Hangzhou Rongson Leather Products.
Official data of the spring session of the biannual Canton Fair, or the 111th ChinaImport and Export Fair, verified Li's feeling.
Export contracts signed at the fair, which concluded on May 5 in Guangzhou, capital ofsouth China's Guangdong Province, totaled about $36 billion, down 4.8 percentcompared with the 110th session. This is the first decrease in export transactions since2009.
The lingering European debt crisis and tough job market in the United States wereamong the factors that caused the decrease, said Liu Jianjun, the fair's spokesperson.
Liu urged Chinese companies, especially those in low-end manufacturing andprocessing, to focus on developing their own brands and invest more in self-innovation.
Sluggish demand
The fair registered more than 210,000 overseas buyers from 213 countries andregions, a slight increase of 0.23 percent over the previous session.
The number of buyers and transactions from the European Union decreased by 15.5percent and 5.6 percent, respectively, Liu said. The value of transactions with U.S.buyers also decreased by 8.1 percent compared with the last session.
Meanwhile, buyers are still cautious in signing long-term orders with Chinese exporters,said Liu, who noted that 86.3 percent of orders signed at the fair are medium- andshort-term deals.
The figures at the Canton Fair, a barometer of China's foreign trade, sent gloomysignals throughout the export sector.
Based on the current global economic outlook, China's foreign trade is expected tocontinue its downward trajectory throughout 2012.
China's foreign trade in 2012 faces situations "far from optimistic" due to thwartedglobal demand, rising costs and a harsh trading environment, said the Ministry ofCommerce (MOFCOM) in a statement.
At home, surging labor costs and higher raw material prices are squeezing thecompetitiveness of Chinese exporters as well.
"Rising cost is the biggest worry for us," said Zeng Hongwu, Vice General Manager ofGuangdong Apples Industrial Co. Ltd., a bag producer.
According to Zeng, workers' salary has been rising at around 20 percent annually inrecent years. At the end of 2009, the average salary was 2,000 yuan ($317) permonth. This year it has climbed to more than 3,000 ($476) yuan, Zeng said.
A survey released by the National Bureau of Statistics showed the 159-million migrantworkers saw an average salary increase of 21.2 percent in 2011 from a year earlier.
Inflation in raw materials also squeezed the profit margin of Chinese exporters.
"Since last year, prices of raw materials, including leather, zippers and magneticbuttons, have increased. The price of magnetic buttons almost doubled in one year,"said Zeng.
The rising cost has cut Zeng's profit margin to 3-5 percent from 8-10 percent severalyears ago.
"Unfortunately, we cannot transfer the rising costs to buyers. Our major buyers fromEurope seem more vulnerable to price increases and have cut their ordersdramatically," said Zeng.
The yuan's appreciation also added woes to shrinking trade volume at the Canton Fair.
On April 16, the People's Bank of China, the central bank, widened the trading band forthe yuan against the U.S. dollar to 1 percent from 0.5 percent. The move will surelymake Chinese currency yuan more flexible.
"The yuan will witness more fluctuations in the future. Small and micro-exporters will bemore vulnerable, especially those who are not good at cost management," said XuChangsheng, Vice General Manager of Quanzhou Jinxin Toy Co. Ltd.
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