Western Buyers Surge at China Trade Fair As Export Deals Grow Modestly

The number of European and American buyers attending China’s largest trade fair rose sharply this autumn, though exporters on the floor said economic headwinds in the West continued to act as a drag on deal making.

Attendees from the European Union and United States at the latest edition of the Canton Fair, which concluded on Wednesday, were up by 38.2 per cent and 22.2 per cent, respectively, compared with the previous event in April, according to the event organisers.

The increases far outpaced a 12.2 per cent overall rise in buyers, with visitors putting the surge down to an easing in trade tensions in the wake of President Xi Jinping’s visit to the US in September. The value of the export deals announced at the trade expo, however, was up just 4.1 per cent from the April session at US$26.75 billion. The total was also still 8.7 per cent lower than the value of deals agreed in autumn 2019, the last Canton Fair held before the Covid-19 pandemic.

Some of the more than 32,000 Chinese exhibitors at the event in Guangzhou pointed to economic struggles in Europe and foreign exchange volatility as reasons for light growth in anticipated deals.

Yulia Yuan, a Chinese furniture exporter targeting European markets, told the South China Morning Post she expected a tougher year ahead as inflation squeezes household budgets and makes traditionally high-margin European buyers more cautious.

“Demand for high-end products and orders with higher margins will become much smaller,” said Yuan, a foreign trade saleswoman with Tianwei Steel and Plastic Products Co. “Products offering good value for money and meeting basic needs will be easier to sell.” Economic growth in the euro zone slowed to 0.4 per cent in the third quarter, down from 0.6 per cent in the second quarter, according to Eurostat, the EU’s statistical bureau. Annual inflation reached 3.8 per cent in September. Customers in the EU were also reluctant to absorb rising Chinese production costs, leaving exporters struggling to maintain margins, Yuan said.

Raw material costs had risen by around 15 per cent from last year, Yuan said, but European customers were only willing to accept price increases of 3 to 5 per cent, leaving exporters with little room to negotiate.

“You either take orders at a loss or turn them down,” she said.

Lighting exporter Tan Jian said a stronger yuan had squeezed manufacturers’ margins. Recent rises in the yuan mean exporters paid in euros or US dollars lose money when they convert their earnings into the Chinese currency. Rising material costs had made things even more difficult, Tan added.

Chinese exporters would face growing pressure to rethink a business model built on low prices and large volumes, he said. Exporters displayed 4.88 million products at the fair, with the number of AI-powered products on offer up 14.1 per cent compared with April. Both the lighting and furniture company reps said they had met hundreds of buyers.

“The days when you could cut prices to win orders, increase production volumes and make money through economies of scale are over for most traditional export manufacturers,” Tan said.