Tech exporters turn to R&D as business weakens

Even though China is focusing more on innovation and technology to drive its economy and foreign trade, a growing number of high-technology enterprises have seen exports fall.

Lower overseas demand, increased labor costs and tough competition are to blame, said Yu Xiaofei, a business manager of Dongsheng Motor Group. "We did many things to cope with the situation, such as investing more on research to develop new products," he said.

The Shenzhen-based company, which designs, makes and sells mechanical and electrical products, said business contracted more than 10 percent year-on-year in the first three quarters.

"Labor costs and exchange-rate fluctuations further squeezed profits," Yu said.

Demand declined in the United States and Europe, which account for about 60 percent of its sales, he said.

"A growing number of high-technology and manufacturing businesses have reshored operations in the US in recent years, which also poses challenges to our business," Yu said.

According to the General Administration of Customs, exports of mechanical and electrical products increased just 0.4 percent in the first three quarters.

In the trade hub of Guangdong province, high-technology exports slid 18 percent to $158.2 billion in the first nine months, according to the provincial statistics authority.

"China has a low market entry standard in the high-technology sector, which, to some extent, has led to an oversupply," said Zheng Jiongguang, general manager of Shenzhen Gtops Electric Technology Co Ltd.

Companies in the sector should spend more on research instead of just making similar products, Zheng said. "Licenses for technology and patent rights will help increase profits."

The Shenzhen-based company has developed technology for water heaters that reacts to body movements to adjust the temperature. The devices can replace remote controllers.

He said the company has applied for patents involving more than 360 body gestures, and overseas companies have already shown an interest in the technology, which was displayed at a high-technology fair in Shenzhen.

According to customs figures, processing (assembling ready-made components into finished products) in the high-technology sector still accounts for nearly half of the industry's exports, suggesting that Chinese companies need to put more effort into research.

Some high-technology companies, such as Guangzhou Bosma Technology Co, have diversified their products by branching out into Internet and cloud computing services.

"We are introducing new technology to meet the growing demand for smart products," said Lei Bo, general manager of Bosma. For example, the company has developed products including smart swimming goggles and cloud intelligent thermometers.

Sales in the US, a major market for smart products, declined slightly in the first three quarters, said Zeng Dexiang, president of Bosma. He added: "The latest products will help drive sustainable business growth for us."