Foreign trade survey in the first half of 2014: Can exports grow?

The latest China Export Outlook Survey Report from Global Sources (https://www.globalsources.com/) shows that exporters still believe that exports will maintain in the first half of 2014, although the optimism is less in the second half of 2013.

Among the 529 companies surveyed, 67 percent expect their export revenue to increase year-on-year in the first half of next year. This is the second consecutive semi-annual outlook survey in which most exporters expect growth in their export business. In the last survey, over 70% of enterprises expected export growth in the second half of 2013.

In this survey, most companies that are bullish on exports in the first half of 2014 expect a moderate export growth rate; 48% of them expect a year-on-year growth rate of moderate Almost 10-20%, 15% believe that the export growth rate is not more than 10%. At the same time, 43% of companies expecting a drop in exports in the first half of next year expect a drop of more than 20%, and several of them expect a drop of more than 40%. This result is significantly lower than the 52% in the previous survey, showing that exporter confidence is actually recovering.

From an industry perspective, hardware and auto parts companies are the most optimistic, with nearly 75% of hardware and auto parts exporters expecting an increase in export revenue in the first half of next year , only 8% are expected to decline. Even so, there is caution in optimism. Among the hardware and auto parts companies that pre-exported, 44% expect an increase of 10-20%, which is close to the average of all industries. The home furnishing and gift industry is the most severe. 21% of such enterprises expect exports to decline in the first half of 2014, and 13% are expected to remain unchanged.

The appreciation of the renminbi becomes the biggest obstacle to exports

The survey results show that the appreciation of the renminbi has replaced rising labor and manufacturing costs as the biggest obstacle to export growth in the first half of next year. And the rising cost has always been the top of the list of the biggest export challenges in the first three surveys of the same kind by Global Sources.

The yuan has appreciated more than 2 percent against the dollar this year to its current level of 6.09, the most of the 11 major Asian currencies tracked by Bloomberg. An appreciation of the renminbi will hurt the competitiveness of Chinese exporters, especially small and medium-sized ones.

The fact that the RMB exchange rate follows the US dollar and fails to reflect changes in the value of other currencies is the root of the problem. For example, exporters mainly in emerging markets have suffered. Since the second quarter of this year, the currencies of emerging market countries have depreciated sharply against the US dollar, making Chinese products more expensive. Zhang Monan, deputy director of the World Economic Research Office of the Economic Forecasting Department of the State Information Center, said in an interview with the South China Morning Post that under the existing exchange rate system, the renminbi has always kept pace with the US dollar, and cannot reflect changes in the currency values of other major trading partners in mainland China. .

The above progress adds weight to the reform of the RMB exchange rate to ensure and maintain China's long-term export competitiveness. In the aforementioned South China Morning Post article, Stephen Roach, a professor at Yale University and former chairman of Morgan Stanley's Asia division, pointed out that the direction of reform should be "an increasingly flexible, eventually convertible renminbi." ". Dr. Alicia Garcia-Herrero, chief economist for emerging markets at BBVA, believes that the internationalization of the renminbi will boost trade between China and emerging market countries.

Enemies before and after

In order to maintain increasingly meager profits and maintain cheapness, which is the foundation of Chinese products in the international market, Chinese exporters continue to balance costs and prices. Walking on a tightrope.

Rising manufacturing costs and workers' wages have always been a pain in the minds of companies participating in previous Global Sources Export Outlook surveys, and this time is no exception. Sixty-three percent of the exporters surveyed cited rising costs as one of the biggest challenges they are currently facing.

In terms of industry, labor-intensive industries such as clothing, textiles and fashion accessories companies will be hit hardest by rising costs.

Over the past few years, Chinese workers' wages have continued to rise, and the current minimum wage in coastal areas has reached the middle level across Asia. China Labour Bulletin once estimated that Chinese workers' wages, although still lower than Japan, South Korea and Singapore, have significantly surpassed Bangladesh, Vietnam and Cambodia. This is why textile, apparel and fashion accessories factories are most concerned about competition from low-cost countries. The proportion of textile, apparel and fashion accessories companies that choose this option is as high as 37%, the highest in the industry and almost double the average of all industries.

High costs drive up export prices, and related problems follow. Sixty-two Chinese exporters say they are now facing pressure from buyers to drive down export prices and buy more for the same amount of money. However, this is easier said than done. In addition to rising costs driving prices up, China is transitioning from cheap production to high-end manufacturing. Writer Shaun Rein has stated that "Importers who source in China will pay higher prices for their products."

This change is in line with the survey results. The interviewed companies indicated that production and product development in the first half of next year will continue to follow the high-end line, from "pure" processing and assembly to redesign and brand transformation.

Among the foreign trade promotion measures in the first half of next year, the importance of flexible pricing dropped to fifth, down two places from the position in the second half of this year.

Expanding exports to emerging markets remains the No. 1 tool for exporters to boost export growth in the first half of next year. Although the EU and US market demand has improved, the strength is relatively weak.

Compared by industry, electronic products are most affected by the sluggish demand in Europe and the United States. 44% of exporters of electronic products and components disclosed that orders from Europe and the United States are slow, which is 8 percentage points higher than the average of all industries.

European and American markets continue to gain popularity

The United States and the European Union remain the largest export markets for Chinese-made products. In fact, China's foreign trade exports to the US and the EU improved in October this year, with exports to the US up 8% and exports to the EU up 12%. "Businessweek" (Businessweek) quoted UBS Securities (UBS Securities) China economist Wang Tao reported that "China's trade with the EU has achieved the fastest growth rate in two years." This survey report confirms this situation, the proportion of exporters with the EU as the main market is 28%, slightly higher than the 27% in the United States.

The focus will change in the first half of next year, with one in three businesses turning to the US and one in four in the EU one. Four years into recession, the EU's halo is gradually fading. The European Union recently lowered its forecast for economic growth in the euro zone in 2014, while raising its unemployment rate forecast.

Exports to the US have not been smooth sailing either. Global Sources' October investigation into the impact of the U.S. federal government shutdown on Chinese exports showed that exporters were already affected before the incident was temporarily resolved on Oct. 17. The survey also pointed out that although most exporters will further wait and see before taking action to boost exports to the United States, some companies surveyed expect future exports to the United States will be affected.

South and Central America is a key target for emerging markets in the first half of next year. The Asia-Pacific region was the main export market in the second half of 2013, while export data for October showed that exports to ASEAN (ASEAN) grew much less than at the beginning of the year. "Asean countries are sharply reducing current account deficits and economic growth is slowing," said Louis Kuijs, chief China economist at Bank of Scotland, in a research note.

Frequency of export orders indicates export The company continued to expand its export business. New orders will contribute up to 25% of export revenue for 63% of the companies surveyed in the first half of next year; another 26% of companies will also generate 26% to 50% of their export revenue from new export orders.

About this survey

This survey samples enterprises by province, industry and size, representing China's export manufacturing Industry. Most of the 529 companies surveyed were from China's four major exporting provinces, including Guangdong, Zhejiang, Fujian and Jiangsu, covering industries such as electronics, clothing and fashion accessories, household goods, and hardware/DIY products.

In terms of enterprise scale, nearly 60% of the interviewed exporters are medium-sized enterprises with an annual export value of between US$1 million and US$5 million; about 30% of the exporters have an annual export value of less than US$1 million of small businesses; the rest are large suppliers with annual exports ranging from $10 million to $50 million.