Canton Fair: Exporters from China adopt a more assertive approach as they compete for foreign buyers.
China’s Canton Fair, also known as the China Import and Export Fair, the country’s largest and oldest trade fair, has resumed in-person exhibitions after three years of being held online due to the pandemic.
The fair, which began on 15 April and will run until 5 May, saw 66,000 foreign buyers attend the first portion of the event.
Chinese exporters welcomed the return of in-person business, but competition has become more intense due to weaker external demand from Western economies, geopolitical tensions, and order reductions.
Even though the fair had a large crowd, the number of foreign buyers was visibly fewer compared to pre-pandemic years.
Many Chinese exporters had tempered their expectations as the global economy was not doing well, causing some exhibitors to sit alone in empty booths considering what to have for lunch.
Many American buyers were exploring potential new suppliers in Vietnam and Indonesia.
Despite this, data released this month reflected robust Chinese export growth in March, up 14.8% from a year earlier to $315.59bn, ending a run of five consecutive months of declines.
Rebounding March exports aside, China’s trade data indicates hastened relocation of supply chains.
According to customs data, exports from foreign manufacturers in China fell by 16.3% in the first quarter of this year compared to the same period in 2020.
This decline stands in contrast to China’s overall exports, which increased by 0.5% year-on-year in Q1.
The drop in exports from foreign manufacturers is due primarily to falling shipments from the processing trade, which involves importing raw materials and re-exporting finished products after processing or assembly by Chinese companies.
Smartphones, computers, and integrated circuits are major products exported under this category, and all continued to decline in March, which was compounded by a decrease in global demand.
The value of smartphone exports fell by 31.9% in March to the lowest level in 19 months, with 80% of Chinese smartphone exports belonging to the processing trade. Taiwanese multinational electronics contract manufacturer Foxconn, which assembles Apple products in China, is a major player in this sector, but the company has been diversifying to other countries, including India.
The value of computer exports also declined for the eighth consecutive month in March, mostly driven by a sharp drop in the processing trade, which accounted for over 60% of total shipments.
However, the negative growth of the export value of integrated circuits narrowed in March, marking the ninth straight monthly decline amid intensifying efforts by Washington to cripple China’s ability to produce advanced chips. China has been the major global manufacturing base for many foreign brands in the past four decades due to cheap land and labor as well as a complete infrastructure network.
However, the trend has been gradually reversing amid rising labor costs and simmering geopolitical tensions between Beijing and Washington, and was further worsened by supply chain disruptions during the three years of China’s zero-Covid policy.
Multinational companies are accelerating the deployment of “China plus one” and “in China, for China” strategies by diversifying their investments to other regions, including Southeast Asia.
Last month, China’s shipments to the Association of Southeast Asian Nations (ASEAN) – the country’s largest trade partner – surged by 35.43% year-on-year, while shipments to the United States dropped by 7.68% compared to the same period last year, marking the eighth straight monthly decline.
According to Alicia Garcia-Herrero, chief economist for Asia-Pacific at Natixis, the final products were assembled in Southeast Asia and then re-exported to the US to avoid tariffs.
Former mayor of Chongqing Huang Qifan said that China’s trade volume with the ASEAN region had increased by 50% in the past three years, with Chinese companies being the largest source of foreign investment in Southeast Asia