Chinese manufacturers grapple with trade slowdown

GUANGZHOU -- While many Chinese export-oriented manufacturers have been saddled with slowing foreign trade growth due to sagging overseas demand, others have found a way out through technical innovation and the exploration of new markets.

China's foreign trade in the first three quarters of the year rose a mere 6.2 percent to $2.84 trillion, a sharp contrast with the 20.3-percent growth registered during the same period in 2011, according to the General Administration of Customs.

"We received a decreased number of orders this year and we had to cut production on several lines," Xu Yongning said at the ongoing Canton Fair, the country's largest bi-annual trade fair, being held in South China's city of Guangzhou.

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Xu is the sales manager for Shanghai Junda Auto Decoration Co Ltd, which exports automotive accessories to more than 30 countries. "This year's situation is rather disheartening," he complained.

Sluggish overseas demand has forced some Chinese manufacturers to cut production and lay off workers.

While LDK Solar Hi-Tech Co Ltd, a major solar panel producer that exports more than half of its products to the EU, laid off about 7,000 workers this year, Yingli Solar, another solar panel maker, has promised not to cut labor or lower its wages. Instead, it has used technical innovation to bring costs down.

Ruan Moteng, a marketing manager, said the company held an innovation expo in June this year, soliciting technical know-how and innovative ideas from its subsidiaries and encouraging its employees to share their experience with improving efficiency and cutting costs.

China's lucrative photovoltaic industry has amassed hundreds of manufacturers over the past decade. But excessive competition, compounded by a shrinking European market, has eaten into their profit margins, pushing many to the verge of closure.

Ruan said cost-cutting through technical innovation will further shore up the competitive advantages of industry leaders, while those that are not competitive enough will be forced out of the market.

"Only the stronger players will stay. This is good for the development of the industry," he said.

Thanks to innovation and competitiveness, solar panel prices dropped from four US dollars per watt five years ago to about 80 cents per watt currently, making the products more affordable.

This has led to a market expansion of solar application products from traditional European and US markets to southeast Asia and Africa.

Solar Trend, a Chinese solar energy application company, has established an edge through the introduction of solar panel-based lighting products targeting the African market, where many rural areas still lack electricity.

Calem Zhu, a sales manager at the company, said Solar Trend has taken advantage of falling prices for solar panels to further expand its market.

The Gaoneng Electric Company entered the solar industry last year, initially focusing on the high-end European and US markets, said Ye Ling, the company's sales manager. Ye said the gloomy outlook in these markets has forced the company to turn to emerging markets, such as Africa and the Middle East.

While touring the Canton Fair on Tuesday, Minister of Commerce Chen Deming urged Chinese enterprises to devote more efforts to independent research and development, as well as encouraged them to tap emerging markets.

China recently rolled out a package of regulations to help exporters reduce transaction costs and improve efficiency.

With the implementation of the preferential measures, China's trade will likely take up an even bigger share in the global arena, the minister said.