Buyers of general merchandise can expect to pay more for goods purchased from Greater China in the coming six months, while electronics importers will feel less of a pinch, according to Global Sources' Fifth Bi-Annual China Supplier Survey. However, most suppliers indicate they are striving to keep increases moderate, especially in the electronics sector.

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.

On a positive note, over half of all respondents say they plan to limit price increases to less than 5 percent, but the rate of increase varies by industry. In the furniture industry, for example, more than half of exporters say they expect price increases of 5 to 10 percent. This is mainly driven by a 35 percent increase in the price of solid wood in the past year.

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
Among the top challenges for Greater China general merchandise suppliers surveyed:

5 percent have difficulties with stricter overseas standards.

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.

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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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