| China prices: Most exporters expect increases, aim to keep them moderate |
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| Friday, 02 May 2008 | |
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We surveyed over a thousand exporters in Greater China to gauge price trends in the next six months. Pressured by an appreciating currency, rising raw material and labor costs, reduced VAT refunds, and an uptick in inflation, most respondents expect to increase prices. However, amid growing buzz about alternative source markets, such as Vietnam and India, China suppliers aim to minimize price hikes to stay competitive.
Eighty percent of general merchandise suppliers in the region foresee an increase in export prices. This is up from 59 percent in the previous survey, and is the highest since the first survey in 2005. Meanwhile, only about half of electronics makers predict higher prices amid relentless price competition, and 25 percent plan to reduce prices.
Global Sources researchers interviewed 711 general merchandise manufacturers and 322 electronics makers in Greater China in high-demand export categories ranging from eyewear and handbags to living room and children's furniture, as well as 10 electronics sectors covering access control, battery chargers, Bluetooth headsets, DC motors, digital cameras, in-car TVs, IP cameras, PC cameras, media players and USB flash drives. The Survey is designed to provide buyers with projections on pricing, capacity and production trends across the region. Greater China manufacturers have been absorbing much of the cost increases over the past few years to stay competitive. Due to higher raw material costs, an appreciating renminbi (RMB) and a cut in the export tax rebate, a growing number now have no other option but to raise prices.
Despite challenges, suppliers remain optimistic
In spite of the anticipated price hikes, more than 90 percent of respondents across all industries expect exports to grow. Ninety-three percent and 84 percent are expanding capacity for general merchandise and electronics, respectively, to match rising demand, with almost half increasing by at least 20 percent. In order to boost margins, nearly half of suppliers said they are targeting the European Union where consumers are more quality-driven and less price-conscious, and where the euro remains strong against the RMB. A large number of manufacturers are also working to automate to improve their efficiency and keep costs low. This half year's Survey shows that although Greater China suppliers face multiple challenges and cost pressures, they seem to be able to adapt without having to raise prices significantly. China Supplier Survey is part of Global Sources' sourcing and product information services. These include Global Sources Online, Global Sources Direct, China Sourcing Fairs, Global Sources trade magazines and China Sourcing Reports. |
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With team members in Chongqing, Chengdu and Xi'an, the thoughts and prayers of Global Sources are with the victims of China's recent earthquake. Global Sources will donate RMB 500,000 to relief agencies working in the region. In addition, we will match contributions from team members for a total donation of up to RMB 1 million. If you are looking to help, here are several China-specific charities: China Foundation for Poverty Alleviation China Children and Teenagers' Fund (CCTF)
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