China’s Top Trade Fair: A Barometer for Global Economic Trends?

According to Chinese exporters showcasing their products at the biggest trade fair in the country held in Guangzhou, the struggling global economy is negatively impacting their businesses. As a result, several exporters are putting their investments on hold and even reducing their workforce.

The overall atmosphere at the Canton Fair is subdued, indicating that China’s sudden surge in exports in March may be due to exporters fulfilling delayed orders from last year caused by COVID-19 restrictions, rather than a genuine sign of economic recovery.

The initial significant trade exhibition after China lifted COVID-19 restrictions and reopened its borders coincides with a decrease in demand for Chinese-manufactured products due to the increased borrowing costs in the US and Europe. Kris Lin, who represents Taizhou Hangjie Lamps, a Christmas light producer, shared that their orders have dropped by 30% compared to last year.

Lin acknowledged that the problems encountered last year were related to logistics and production disruptions, which were solved with the assistance of the local government. However, the current challenges are external and cannot be resolved by the company.

He mentioned that this year will be the most challenging for his business due to the increased electricity costs resulting from the conflict in Ukraine. This has led to a further decrease in demand for their decorations. Lin added that his company cannot lower their prices, but they may have to consider reducing labour costs.

The company relies on contractual workers who are typically released from their employment after the delivery of Christmas orders, which usually takes place between September to October.

In case of low orders this year, I will release my workers earlier. Huang Qinqin, who is the sales director of Zhong Shan Shi Limaton Electronics, a company that manufactures exhaust fans, has similar views on reducing costs as the company’s orders dropped by 50% in the first quarter.

Huang stated that at their factory, employees work based on the volume of orders received. Previously, this meant working overtime even on weekends, but this year, it is more common for workers to take weekends off.

An anonymous producer of shaving equipment from Ningbo, located in the eastern part of China, revealed that the company had already dismissed some of its workers. If orders do not improve, the company will decrease its prices in the upcoming months. The current situation that manufacturing workers are facing is becoming more challenging and will likely increase worries among policymakers. Their aim is to create 12 million new jobs across the country this year, which is higher than last year’s target of 11 million.

Several Chinese suppliers have informed Reuters that they do not plan to allocate significant funds towards enhancing their production lines this year due to the weakened demand. Luna Hou, who works as a sales representative at Topgrill, a manufacturer of outdoor grills, stated that their company has no intention of increasing its investment. They have instead decided to lower their prices by 5% to attract customers. Vicky Chen, who is the foreign trade manager at Qinjia Electric, a company that produces sockets, shared that she does not anticipate a significant increase in sales during the fair, which will run until May 5. Chen believes that the global economy is currently struggling, and the trade fair is unlikely to change this situation.

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