China's ASEAN exports on the upswing

	Nan’an New and Beauty's exports melamine-based products to the ASEAN, including this tray set. The largest piece measures 321x235x35mm.

Suppliers are primarily targeting Singapore, Indonesia and Vietnam. Many are promoting their in-house brands.

China exporters will continue to strengthen their presence in the ASEAN in coming months, enabling the country to sustain revenue from international trade despite economic challenges in the US and the EU. Difficulties in China’s traditional export markets have reined in exports over the first three quarters of 2011.

For this reason, many manufacturers are planning to expand shipments to alternative destinations, according to a recent survey conducted by Global Sources.

Within the ASEAN, China makers have set their sights on Singapore, Indonesia, Vietnam, Malaysia and Thailand, attracted by strong demand there. The first three are already the largest markets for China goods among the member countries. Between January and October this year, shipments to Singapore exceeded $29.3 billion, up nearly 10 percent YoY. Revenue from Indonesia and Vietnam business jumped 35 and 31 percent, respectively, to reach $23.6 billion and $23.1 billion. Together, the three accounted for 55 percent of China’s exports to the ASEAN, valued at $137.4 billion, during the period.

China suppliers are leveraging the lack of established domestic labels among member countries in their brand-building efforts. Among China’s main ASEAN export categories, including electronic devices, machinery, plasticware, home appliances, textiles, toys, lighting, and health and medical products, many shipments are under OBM contracts.

Backed by its ASEAN business division, the Midea Group has become one of the largest suppliers of electric fans among the organization’s member countries. “Midea was able to establish its brand in Vietnam after nearly two years of promotional activities,” said Cambodia agent Own Hsu. “Prior to this, Vietnam buyers preferred Japan-brand home appliances.”

Guangdong Galanz Enterprise Group Co. Ltd also has a representative in Cambodia marketing in-house-branded air conditioners. The company is similarly promoting OBM products in Thailand, Singapore and Malaysia.

Most of Jinan Ruijie Mechanical Equipment Co. Ltd’s exports to the ASEAN carry the in-house Ruijie label. Shipments there account for 20 percent of the supplier’s aggregate outbound business. The manufacturer offers laser cutting machines to Thailand, Singapore and Indonesia.

Although many China SMEs plan to boost ASEAN exports, they will continue to allot a significant share of shipments to the EU and the US. This is because products sent to the latter two destinations still generate higher margins, consequently propping up overall revenue.

Rice cookers shipped to member countries bring in only 5 percent profits for Guangdong Galanz. The company makes a 10 percent gain from other home appliances.

More than 50 percent of interviewed manufacturers said they will keep the ASEAN’s export share at 10 to 20 percent and send the rest to the US and the EU. Jinan Ruijie targets the last, shipping out laser cutters on an OEM basis.

“US- and EU-bound products yield greater margins, but entail high costs for certification and testing, respectively,” said Lucas Huang, general manager of Nan'an New and Beauty Melamine Products Co. Ltd. “Simpler requirements of ASEAN markets balance offset additional outlay.” Melamineware accounts for 70 to 80 percent of the supplier’s aggregate exports. More than 10 tons or three or four FEUs are shipped out monthly.

China’s exports to member countries will continue to consist primarily of low-value goods. This is particularly true for suppliers moving upmarket. Big-ticket or more expensive products, including Apple peripherals, will still go to the US and the EU and other mainstream destinations.

The emergence of certain ASEAN members as low-cost manufacturing hubs is also spurring China makers’ shift to the high end.

Garment suppliers in China, for example, are highlighting product detailing and craftsmanship to compete with less-expensive products from Vietnam. The latter has, over the past two years, leveraged its cost advantage over China to become an alternative source for clothing and textiles.

The Vietnam Ministry of Trade and Industry placed the country’s garments and fabric exports at $13.5 billion by end-2011, jumping 21 percent YoY.

China ceramic tile makers, meanwhile, are using automatic machinery to speed up efficiency and as part of differentiation efforts. Tile manufacturing in the ASEAN continues to be labor-intensive.