China suppliers focus on emerging markets as export orders from Europe soften – Global Sources survey shows

HONG KONG, Nov. 28, 2011– China suppliers are boosting overseas shipments to emerging markets amid slowing orders from the EU as the region tackles its debt crisis. This is according to a survey of 581 exporters byGlobal Sources(NASDAQ: GSOL).

In the months ahead, 42 percent of survey respondents expect to strengthen their footholds in South and Latin America, the Middle East, Africa, Eastern Europe and the Asia-Pacific region. Suppliers are particularly optimistic about markets in Asia, mainly because of China's free trade agreement with many countries in the region.

Close to 20 percent of interviewed companies plan to increase their presence in the China domestic market, as consumption has been on the rise, due in part to favorable government policies.

"China suppliers are already taking proactive measures to sustain their export business in view of slowing orders from Europe," said Craig Pepples, Global Sources' President of Corporate Affairs. "The majority of surveyed suppliers said their exports have been impacted by the debt crisis. Companies are cautiously optimistic about sales in 2012, with more than 60 percent expecting stable or higher export sales from their Europe business in the year ahead."

The survey shows suppliers are taking other measures to cope with falling orders from Europe:

• 15 percent intend to speed up the release of new products;
• 11 percent of exporters plan to cut production costs to boost profitability;
• 10 percent said they are planning to increase R&D spending as they strive to improve product offerings;
• 3 percent may consider relocating their factories to low-cost areas; and
• 1 percent of suppliers believe they may have to shut down their factories if the situation does not improve soon.

Nearly all respondents have felt the effects of Europe's debt crisis on exports. Thirty-five percent of companies report significant impact, while almost 60 percent said there has been some impact.

Europe shipments for 66 percent of surveyed manufacturers have dropped in the past few months. Twenty-two percent said their exports were stable and the rest reported an increase.

Responding to changing needs of Europe buyers

Survey results indicate Europe buyers are placing smaller orders, as they are wary of building up inventory. This is particularly evident in the computer, consumer electronics and communications industries, with almost 60 percent of suppliers reporting smaller shipments.

In addition, more customers are negotiating for lower quotes at a time when spending for materials, components and labor is climbing, thereby eroding margins. This trend is more apparent in low-value products such as garments and fashion accessories.

Some suppliers are also reporting a decrease in demand for upscale products and more interest in entry-level models.

China suppliers are already responding to buyers' changing requirements. Over 45 percent of companies said they could offer flexible pricing options, while 31 percent are willing to lower their minimum order quantities.

In response to buyers' need for value-for-money products, many exporters plan to enhance their current models with value add-ons. Almost 20 percent are planning to release more basic or low-end models.

Cautious optimism for 2012 exports

As the possibility of an economic contraction looms over Europe, China suppliers are cautiously optimistic in their export projections. A modest 29 percent expect shipments to Europe to rise in 2012, while 34 percent expect revenue to remain unchanged.

Close to 40 percent, however, foresee exports to the region falling further. Most of these companies expect shipments to drop between 10 and 20 percent.

Europe is nonetheless expected to remain a primary overseas destination for China exporters.

The survey was conducted from Nov. 4 to 11 by email. A total of 581 suppliers were interviewed from various industries, including home products, electronics, hardware and DIY, gifts and premiums, garments and textiles, solar and energy-saving products, and electronic components. Nearly half of the respondents are based in Guangdong province, while the rest are from Zhejiang, Jiangsu and Shanghai.

The complete survey can be downloaded for free at

href="http://www.globalsources.com/NEWS/Survey-Europe-Debt-Crisis.html">http://www.globalsources.com/NEWS/Survey-Europe-Debt-Crisis.html

News Source : China suppliers focus on emerging markets as export orders from Europe soften – Global Sources survey shows