Is the worse over for businesses in China, as export orders retreat by as much as 30%

10-Nov-08

Export sales of several Chinese processors is down by about 30%- caused by evaporating orders due to the financial crisis as well as housing calamity in USA and Europe. Many players expect the going to get tougher in the next quarter as concerns of job security in USA have deteriorated markets sentiments, shrinking consumer buying. Buying has been refrained despite good products as reflected in the sharpest fall ever in US consumer buying recorded in the month of October. As a result, several key Chinese processors are left with the option to either shut shop or reduce production rates. Growth in China's economy has been revised to less than 10% for 2008, as compared to 11.9% growth recorded last year. China's problems started even earlier than the onset of the US financial crisis because of the rising Chinese yuan and rising raw material costs in the last two years that increased costs and reduced profitability. However, the silver lining in this scenario has been retreating polymer prices to 2003 levels- making Chinese products cheaper, thus evoking an interest from buyers. Despite a drop in orders from USA and Europe, orders from Japan and South Korea have held steady. Steps by the Chinese government of reinstating some export tax rebates suspended last year, are also expected to aid exporters. Processors are also trying to survive in these conditions by making products more attractive, augmenting technical specs and reducing labour dependence in the case of machines. Some companies are seeking new markets such as environmental friendly bio-based or biodegradable products.