Trade indicator improves, confidence does not, wages still on the rise
GUANGZHOU — The latest China Import and Export Fair, a biannual event widely seen as an indicator of China’s trade activity going forward, was a mixed bag. It showed signs that Chinese exports are on the mend, but a full-scale recovery remains a long way off due to structural problems.
The event, known as Canton Fair, is the largest trade fair in China. It has been held twice a year since 1957. Every spring and fall, some 200,000 foreign buyers descend on Guangzhou, capital of Guangdong Province, southern China, to attend the event.
The fair is of particular interest because the goods sold at the event will be shipped overseas over the next six months.
During the 121st Canton Fair, which ended on May 5, some 24,000 Chinese companies sold $30 billion worth of goods to foreign buyers. Sales were up 7% from last spring and topped the $30 billion mark for the first time in six events. It was the third straight year-on-year increase.
“Exports are finally out of the worst period,” said an official from a Chinese company. Data supports this view. The value of Chinese exports in dollar terms began showing signs of recovery in the fall. In April, the barometer was up 8% year on year, extending gains in March.
For the most part, however, participants were doubtful that Chinese exports are back on a full recovery track. “It seems we have 30% to 40% fewer buyers visiting the trade fair compared to last year,” said a sales representative of a Chinese glassmaker from Shanxi Province. The company took part in the event for the 20th time. “Our orders are falling significantly,” the representative said.
Though back above the $30 billion mark, sales are still slightly below 80% of the recent peak of $37.9 billion, marked in the fall of 2011.
There are various reasons behind Chinese exports’ sluggish recovery, including the lackluster performances of emerging economies. But the primary reason is structural. Wages have surged in China, bringing prices up along with them, said a buyer at the trade fair.
As online businesses and other service industries rapidly expand, Chinese manufacturers are being confronted by a serious labor shortage. As a result, they are raising pay, sending their overall manufacturing costs upward.
The U.S. under President Donald Trump has also emerged as a source of concern. China accounts for almost half of America’s trade deficit, and Trump has been urging China to reduce the imbalance. Given that China’s trade surplus with the U.S. grew as much as 18% in April from a year before, Trump could push China even harder.
http://asia.nikkei.com/Politics-Economy/Economy/Chinese-exports-can-t-find-lane-to-full-recovery
