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China exporters see slowdown risks growing

Guangzhou, China, October 26, 2011

China exporters face a deeply uncertain outlook due to fragile Western demand and a tightening credit environment and three out of four of them fear a wave of factory closures next year, a Reuters poll at China's largest trade event showed.

The cavernous halls of the Canton Fair beside the Pearl River in the southern export powerhouse of Guangdong, appeared bustling enough -- filled with what organisers said were some 280,000 foreign buyers and 57,000 exhibitors.

But the mood at Asia's largest trade event, a key barometer of China trade, was muted because of gnawing fears that the European debt crisis and a weak US economy could further sap consumer demand for China-made goods.

Few have been left unscathed. A cross-sectoral Reuters poll of 101 small to medium sized exporters at the Canton Fair found that 80 percent said exports had been hit by the US and European problems, 17 percent seriously. "It's just difficult compared to other years," said Anthony Crispin, a veteran British buyer who's attended the Canton Fair for more than 20 years.

"You're buying smaller quantities ... you're not committing to anything at this present time. The market is very up and down like a yo-yo," added Crispin, sales director of Giftworks, a large British supplier of China-made home accessories.

Reflecting global economic weakness and domestic cooling, China's trade surplus narrowed for a second straight month in September to $14.5 billion, with both imports and exports lower than expected.

Growing weakness in the export sector -- still a major engine of China's economic growth -- could have deeper ramifications for the world's second-largest economy.

China is already struggling to cope with inflation, a growing pile of local government debt and a tightening credit environment that is squeezing small businesses.     

Beijing authorities confirmed China's industrial firms are facing increased difficulties due to weakening global demand. Growth of China's industrial output is likely to slow further in the coming months while inflation could remain at a "relatively" high level, the ministry of Industry and Information Technology said on Wednesday. 

Cargo flows also have slowed. Hong Kong, the world's busiest air cargo hub which funnels exports from the Pearl River Delta, posted a 6.1 percent decline in September volume.     

While HSBC's Purchasing Managers' Index (PMI) showed China's vast manufacturing sector expanded moderately in October to end three months of contraction, sentiment amongst Chinese exporters remains cautious.

In the Reuters poll, 74 percent of exporters said there could be another wave of factory closures, mirroring the 2008-09 global financial crisis when thousands of Chinese factories shuttered as orders evaporated after Christmas. Millions of migrant factory workers were laid off. - Reuters
  




Tags: China | Europe | growth | Recession | slowdown |

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