Despite numerous challenges, China's export manufacturers are anticipating healthy year-end growth. This comes as Q3 sales for some lines now exceed full 2009 exports.
The growth in China's exports from Q1 2010 has carried on through the third quarter. Seasonal orders for Halloween and Christmas have been shipped earlier than in previous years, causing an uptick in Q2 and Q3 overseas sales. With such orders already sent out, export growth in Q4 is likely to slow down.
|The model Maple scooter from Taizhou Wangye has â¤2.2/100km fuel consumption. The company has shifted its export focus away from the US and the EU because of strict technology requirements.|
Average export unit prices in Q3 for some products were higher year on year, a factor that could dampen Q4 sales. The average value for toys during the period was $0.74, slightly higher than last year's $0.73. Similarly, prices for apparel increased from $2.32 to $2.50 and those for bicycles grew from $42.23 to $42.69. But motorcycle prices for the same months averaged $414, up significantly from $397 in Q3 2009.
Most suppliers have no choice but to raise prices, due mainly to soaring raw material costs. Cotton, for instance, increased nearly 54 percent in just two months. Silkworm cocoons and wool, meanwhile, are 60 and 40 percent more expensive year on year. If costs do not go down substantially in the next few months, fabric and apparel prices are likely to rise 10 to 30 percent.
Richforth Garments Co. has been trying to keep prices stable for its large-volume, long-term buyers. But with raw material costs rising 3 to 5 percent in recent months, the company has had no choice but to quote higher prices to its small-volume buyers. New models are also 5 to 8 percent more expensive. But Richforth remains optimistic about year-end prospects, especially since exports for the first three quarters of this year have equaled full 2009 sales.
Motorcycle manufacturer Taizhou Wangye Power Co. Ltd, however, is not as sanguine. The large supplier base in China has made competition very tough. Exacerbating the situation is the rise of India, Indonesia and Vietnam as alternative sourcing centers. Vietnam, in particular, offers more competitive prices because its currency, the dong, was devalued 5 percent in 2009. China suppliers, including Taizhou Wangye, are hard-pressed to keep prices low and remain competitive, even if it means cutting profits.
China customs statistics show exports for the third quarter of 2010 increased 24 percent year on year to $430 billion. The country shipped $1.13 trillion worth of goods between January and September 2010, up 34 percent from the previous corresponding period.
The EU and the US remain the largest export markets, absorbing $226 billion and $206 billion in the nine months to September 2010. Exports to the ASEAN-member countries continued to strengthen as well, with shipments reaching $100 billion. Within the association, Singapore was the largest market, importing $24 billion worth of goods. In the EU, Germany was the biggest destination, with exports there valued at almost $50 billion.
In terms of product lines, motorcycles and color TVs saw the biggest gains during the nine-month period, with export revenue up 49 and 43 percent, respectively.
Shipments of motorcycles exceeded 6.1 million units in the first three quarters of 2010, which is close to total exports in 2009. But it is the low volume of shipments in 2009 that contributed to this year's high growth rate. Because of stringent certification standards in the US and the EU, however, the top three markets for motorcycles during the period were Nigeria, Argentina and Burma. Shipments to these countries are mostly low-priced models, with the average export unit prices at $385 for Nigeria and $354 for Burma.
Taizhou Wangye sales manager Davis Shen said the US has the strictest technology requirements for motorcycles imported from China. The company is concerned that finished units might not pass all of the stringent tests, even if samples do. As such, it exports mainly to Eastern Europe, South America and Southeast Asia.
The trend for LCD TVs, meanwhile, boosted growth in the color TVs line. This comes especially since prices of LCD TVs have been falling in recent months.
Bicycles and apparel performed the weakest, with exports from January to September 2010 up by 18.8 and 19 percent.
The low growth rate for bicycles is due mainly to the EU's 17-year imposition of anti-dumping duties on China's exports of the product, resulting in virtually no shipments to the area. Even so, exports this year are significantly better than in 2009, when shipments declined 13 percent.
The apparel industry, on the other hand, is beset by high cotton and labor costs, competition from countries in Southeast Asia, and the yuan's appreciation. With price increases of between 5 and 10 percent now becoming common among manufacturers, buyers are transferring orders to lower-cost Vietnam, Cambodia and Bangladesh.
Note: This article "China exports post strong growth in Q3 2010" was originally published by Global Sources, a leading business-to-business media company and a primary facilitator of trade with China manufacturers and India suppliers, providing essential sourcing information to volume buyers through our e-magazines, trade shows and industry research.
All price quotes in this report are in US dollars unless otherwise specified. FOB prices were provided by the companies interviewed only as reference prices at the time of interview and may have changed.
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