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Expect higher China prices in months ahead

China is steadily moving away from being the world's lowest-cost source of various products. More than 70 percent of the 232 respondents to a Global Sources survey increased export prices in 2010 in response to the rising cost of major raw materials and components.

While the majority of adjustments were minimal, one-third of companies said they adjusted quotes up to 10 percent and 15 percent boosted prices 11 to 20 percent. Consumer products were the most affected, as 34 percent of surveyed suppliers in the line implemented 6 to 10 percent price hikes during the period. Seventeen percent raised quotes 11 to 20 percent.

Manufacturers of various electronic products, in contrast, were able to absorb most of the additional costs. Sixty-five percent of respondents said price adjustments were capped at 5 percent.

In terms of geographic location, the majority of respondents based in the traditional hubs of Guangdong and Fujian provinces, and the Yangtze River Delta region increased prices up to 5 percent. Most of the surveyed manufacturers in China's emerging production centers, however, raised quotes up to 10 percent.

These adjustments are likely to continue through 2011 should material and component costs keep increasing in the months ahead. Twenty-eight percent of respondents based in the Yangtze River Delta region and Fujian said raising export quotes is their primary measure against higher material spending. One-third of surveyed suppliers in emerging manufacturing hubs will hike prices as well.

Only Guangdong companies said they will concentrate on improving production efficiency first. One-third of suppliers based in the province chose this as the main step to deal with rising material costs. Increasing prices was a far second, an option chosen by 19 percent of respondents.

Despite reports of manufacturers transferring some or all production facilities to inland provinces and nearby countries with lower operating costs, this option scored low among respondents. Regardless of where they are located, only 3 percent of surveyed suppliers will relocate factories in response to rising material and components outlay.

Strong yuan not mitigating impact of rising costs

One of the supposed benefits of the yuan's appreciation to China's export manufacturing industry is that imports of key materials and components could become less expensive. But this advantage is not enjoyed by the majority of suppliers.

Two-thirds of respondents said up to 10 percent of their major materials and components are imported. Only 12 percent, however, purchase directly from the overseas suppliers. The bulk of key materials are still sourced locally, whether from domestic providers or authorized agents and distributors.

In terms of industries, suppliers of various electronic products use more imported components. While 52 percent said up to 10 percent of their requirement comes from overseas suppliers, one-third claimed 11 to 30 percent is imported.

In contrast, nearly 70 percent of consumer goods manufacturers said 10 percent or less of key materials are made overseas.

Plastic is the most widely used material in China's export manufacturing sector, regardless of industry. For makers of consumer products, textiles and metal are key materials as well. While 31 percent of respondents said costs increased 6 to 10 percent in 2010, another 31 percent indicated their material expenditure grew more than 20 percent.

Apart from plastic, ICs, PCBs and metal are among the major components and materials at consumer electronics factories. Seventy-three percent of surveyed suppliers said the cost of such components rose up to 10 percent during the period.


Please contact the This email address is being protected from spambots. You need JavaScript enabled to view it. if you have any questions about the survey or would like additional information.

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