Battling pressure on multiple fronts

Exporters pin hopes on policies aimed to bolster logistics, financial services, biz growth

Whether it is buying production materials, keeping close contact with regular clients in developed markets, or preventing business orders from being grabbed by rivals in Vietnam, almost everything is more costly, unreliable and challenging these days for Wang Chunsong, chairman of Color Star (Fuzhou) Products, an exporter of home decor in Fuzhou, Fujian province.

Even though the company's exports, led by foreign countries' booming stay-at-home economy and consumption stimulus policies, kept growing throughout 2021, the export value fell by as much as 30 percent year-on-year to $17 million in the first quarter of this year.

Wang attributed this about-turn mainly to Color Star losing a number of old clients and its inability to cultivate new customers.

Surging prices of production commodities, rising shipping and power costs, the renminbi appreciation in the currency markets, and a 25 percent tariff imposed by the United States will make this year a tough one for many Chinese exporters who are struggling to survive, let alone make a profit, Wang said.

"Many US customers already told us that they used to purchase 70 percent in China and 30 percent in Southeast Asia. However, they said these two figures are about to swap in the future due to the tariff issues and their strategy of adding more manufacturers to global supplier lists. It has been disappointing news for us," he said.

In Guangdong province, which is to the south of Fujian province, Foshan-based Evergo Furniture Ltd, a sofa and bedroom furniture manufacturer, is feeling the pinch of fierce competition coming from Southeast Asian countries, especially Vietnam, Thailand and the Philippines, for international orders. On top of that, the declining consumption power in many developed countries has been driving the company's export volume down since July, said Zhong Sheming, its general manager.

To ease the pressure, the company began to develop its domestic market by building its own brands last year. It notched up 20 million yuan ($3.12 million) in sales revenue in the second half of 2021. Instead of just being an original equipment manufacturer or OEM, the company will foster its own brands via innovation and by catering to domestic consumers' preferences in the coming years, Zhong said.

The stories of Color Star and Evergo represent those of many other export-oriented companies in China. Chinese manufacturers who export goods ranging from sockets, decorations, shoes and induction cookers to electric hot pots and other products face the same issues－soaring raw material and shipping costs, weakening overseas demand for goods, pandemic and geopolitical headwinds.

"Although export orders are there, the profits are meager, and I feel panic when producing those goods," said Zhong.

China's foreign trade surged 21.4 percent year-on-year to 39.1 trillion yuan in 2021, and its exports and imports soared 10.7 percent year-on-year to 9.42 trillion yuan in the first quarter of this year. However, experts warned that excluding the factor of rising export prices, the actual export growth rate has been much lower than the growth rate of export value since the second half of last year.

"If the export price rises and the volume level is flat, the total export value will rise," said Yu Miaojie, deputy dean of Peking University's National School of Development.

If the prices of upstream products are high, it would mean the import prices would be high as well. So, although the average export price is relatively high, the difference between import and export prices is relatively small. Hence the profit margin of companies is limited, he said.

Chen Dapeng, vice-president of the Beijing-based China National Textile and Apparel Council, said it is difficult for Chinese exporters to refuse to accept new orders. If they do not take orders, regular customers will likely make a beeline for competitors. Many domestic companies have demanded a price rise for taking new orders, while many others are having second thoughts on this aspect because they see themselves as fairly replaceable.

To mitigate the pressure on exporters, the State Council, China's Cabinet, released a new set of measures in January to stabilize the country's foreign trade, a key driver of economic growth, to explore the growth potential of national imports and exports, and ensure unimpeded operation of industrial and supply chains.