Exporters eat crow amid slowdown
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E-mail Shanghai Daily, July 25, 2012
Five years ago at the East China Fair, I was shocked to see how arrogant Chinese exporters had become.
A sign typically hung outside their booths: "Only for foreign buyers."
Well, the foreign buyers are drying up now as Europe slips into recession and the US economy stagnates, so manufacturers are being forced to turning to the domestic market they once shunned to keep themselves afloat.
That was pretty obvious at the trade fair this year and last. I hardly saw any signs suggesting exclusivity for foreign buyers. Almost all the exhibitors seemed only too happy to talk to Chinese buyers.
Former export-only companies are facing two major obstacles in cracking the domestic market. One is the lack of distribution channels; the other is a lack of high-profile brands.
Market conditions have grown far more complicated than they were five years ago. It's harder to sell anything anywhere in a world flooded with international goods. Strapped Chinese producers could turn to e-commerce as one solution to eliminating unsold inventories.
But online market competition is pretty cutthroat, giving the edge to products with recognizable brand names. Building up quality brand name takes time and money.
New thinking
Companies that once relied solely on exports to make profits need to retool their thinking.
At this year's fair, I was surprised to find one vendor selling a 1-meter-tall stuff bear for less than US$10 to some foreign buyers. I told the vendor that I, as a domestic consumer, would be willing to pay five times that amount for the toy. The vendor hesitated, then shook his head. He would lose all his orders if he raised prices, even just a bit, while other vendors kept prices low, he said.
Well, that kind of thinking is probably a good sign for inflation but it may speak volumes about the sorry state of Chinese consumer-goods manufacturing.
Thanks to their efforts and loyalty toward overseas markets, Chinese mainland producers thrived for years on a reputation for cheap products.
Made-in-China has become so prevalent abroad that Chinese overseas tourists often find themselves buying souvenirs made by a factory back home.
That scene may be changing as Western governments grappling with high rates of unemployment buckle under criticism that they are allowing jobs to go offshore to cheaper labor sites.
Read that to mean China at the top of the list.
Recent hubbub
The recent hubbub in the US suggests that political and public sentiment against the Made-in-China franchise is rising.
Some American politicians expressed their fury when it was revealed that national uniforms for the US team at the upcoming London Olympic Games were made in China.
One conservative senator even proposed that all the uniforms be burned.
The uniforms, to be worn during the opening ceremony of the games, were designed by American fashion house Ralph Lauren, but that didn't stop the diatribe about where they were sewn.
The US Olympic Committee said it was too late to scrap the uniforms and order Made-in-the-USA versions, but it did promise that all uniforms in the future would come from US textile plants.
The Chinese factory that made the contentious uniforms is Dayang Group Co Ltd in the northeastern coastal city of Dalian. It exports 80 percent of its products, or about 5 million suits, each year to overseas markets.
It is odd for a country like the US, with its loudly avowed belief in the free market, to kick up such a storm about foreign-made products.
But it should be taken as an ominous sign by Chinese exporters that the welcome mat abroad is wearing thin.
It's also interesting to note that many Chinese consumers still prefer foreign labels in the clothing and products they buy. They equate foreignness with quality and status.
The world is changing. Manufacturers and exporters in China need to recognize the new landscape that's emerging and adapt their production and marketing quickly before it's too late.
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