China suppliers believe yuan's appreciation will hurt their export growth -- Global Sources survey indicates

Almost 70 percent of exporters project a decrease in orders if the yuan strengthens; Survey also reveals labor shortage still a persistent problem

Oct 25, 2010, 02:00 ET from Global Sources

HONG KONG, Oct. 25 /PRNewswire-Asia/ -- China suppliers believe the yuan's appreciation will affect exports negatively, if the currency appreciates by at least two percent against the US dollar, according to a survey of 239 exporters by Global Sources (Nasdaq: GSOL) ( ).

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Sixty percent of survey respondents expect some decrease in export orders, while eight percent believe sales will be hit significantly because of a stronger yuan.

More than one-third of suppliers said they expect overseas shipments to begin declining when the yuan strengthens by at least two percent. Another 32 percent believe a three percent rise will trigger a slide in sales.

Increasing export prices is the main measure suppliers said they will take to cope with a stronger yuan. A few companies have even started quoting prices based on a 6.6 exchange rate.

"Many companies, particularly those in labor-intensive industries, are running on paper-thin margins and have no room to absorb currency exchange losses. Such businesses are likely to raise prices once the yuan strengthens," said Craig Pepples, Global Sources' chief operating officer. "By working more closely with large buyers, some exporters are focused on adding new features to enhance the value of their products and justify a higher price point."

In addition, suppliers said they plan to take other measures to cope with the yuan's appreciation:

    -- 30 percent intend to increase focus on the domestic market;
    -- 15 percent of exporters plan to use more imported materials;
    -- 10 percent believe focusing on high-end products may bring in higher
    -- 7 percent said they may use financial instruments such as foreign
       currency options or NDF; and
    -- 3 percent of suppliers intend to use the yuan as a currency for trade.

Labor shortage still an issue

Sixty-four percent of suppliers said they continue to be in need of workers, even as monthly wages have been increased. The shortage is more prominent in areas outside the Pearl and Yangtze River Delta regions, as salaries there are lower than in the coastal provinces.

In fact, 75 percent of respondents said their employees have sought higher salaries or made other demands in the past three months.

In addition to raising monthly wages and overtime pay further, companies are improving the living conditions in factory dormitories to retain and attract workers. Some dormitory rooms now have individual beds and computers with Internet connection.

High material costs, price competition main challenges

Although there are concerns regarding the yuan's appreciation and the labor shortage, exporters are more worried about rising material costs and intensifying price competition. Suppliers in Guangdong are concerned most about price competition, with 26 percent of respondents based there indicating this as the main challenge.

    Among surveyed suppliers:

    -- 21 percent said higher material costs was their biggest concern;
    -- 20 percent cited price competition as a critical issue;
    -- For 18 percent, the labor shortage was the key challenge; and
    -- 12 percent said the yuan's appreciation was their main concern.

Global Sources market analysts interviewed 239 China exporters from the telecom, home products, fashion accessories, garments, textiles, hardware, sports equipment and security products sectors in July and August 2010. Nearly half of the respondents are based in Guangdong province, 24 percent are from Zhejiang and 14 percent from Fujian.

The complete survey can be downloaded for free at and .

About Global Sources

Global Sources is a leading business-to-business media company and a primary facilitator of trade with Greater China. The core business uses English-language media to facilitate trade from Greater China to the world. The other business segment utilizes Chinese-language media to enable companies to sell to, and within Greater China.

The company provides sourcing information to volume buyers and integrated marketing services to suppliers. It helps a community of over 967,000 active buyers source more profitably from complex overseas supply markets. With the goal of providing the most effective ways possible to advertise, market and sell, Global Sources enables suppliers to sell to hard-to-reach buyers in over 240 countries.

The company offers the most extensive range of media and export marketing services in the industries it serves. It delivers information on 4.5 million products and more than 262,000 suppliers annually through 14 online marketplaces, 13 monthly print and 16 digital magazines, over 80 sourcing research reports and 20 specialized trade shows which run 57 times a year across 9 cities.

Suppliers receive more than 192 million sales leads annually from buyers through Global Sources Online ( ) alone.

Global Sources has been facilitating global trade for nearly 40 years. Global Sources' network covers more than 60 cities worldwide. In mainland China, Global Sources has about 2,500 team members in more than 40 locations, and a community of over 2 million registered online users and magazine readers for its Chinese-language media.

    Global Sources Press Contact in Asia:
     Camellia So
     Tel:   +852-2555-5021

    Global Sources Press Contact in U.S.:
     James W.W. Strachan
     Tel:   +1-480-664-8309

    Global Sources Investor Contact in Asia:
     Suzanne Wang
     Tel:   +852-2555-4747

    Global Sources Investor Contact in U.S.:
     Kirsten Chapman & Timothy Dien
     Lippert/Heilshorn & Associates, Inc.
     Tel:   +1-415-433-3777

SOURCE Global Sources