BEIJING (Reuters) -Foreign buyers will throng the vast halls of China’s biggest trade expo from Monday, scouting for deals on Chinese goods that U.S. and European governments complain are flooding global markets.
The 135th Canton Fair comes as China is making a strategic policy shift, accelerating resource distribution towards its manufacturing complex and away from its crisis-hit property sector, in the hope that it can move up the value scale.
This is causing alarm in Washington and Brussels, especially over what China calls the “new three” industries of electric vehicles, batteries and solar energy, where the world’s second-largest economy is becoming a dominant export power.
U.S. and EU officials are concerned their own industries won’t be able to compete with China’s vast industrial capacity driving down prices.
But deep and prolonged factory gate deflation has become a concern domestically as well, as many manufacturers – especially at the lower technological end – are locked in a price war, competing for rigid and tepid global demand.
“For this year’s fair, the keyword will be ‘low price’, whether it is low-tech or high-tech products out of China,” said Zhiwu Chen, professor in finance at HKU Business School.
“Since domestic demand for goods within China is much lower than usual and overcapacity is high across most industries, manufacturers have to cut their prices to achieve more exports.”
Around 93,000 foreign buyers are expected to attend the three-week long fair, perusing the goods of 28,600 exhibitors selling everything from massage chairs and frying pans to garden ornaments in booths covering a 1.5 million square metre space – or 280 football fields.
Organisers said the fair will show off China’s efforts to move up the value chain in line with President Xi Jinping’s push for “new productive forces” in the economy.
For all the hype around China’s rise in the green energy sector, exports of the “new three” accounted for only 4.5% of total shipments last year. The majority of factories are less sophisticated and depressed domestic demand leaves them at the whim of foreign buyers.
Regular Canton fair exhibitor Kris Lin, who owns a lighting products factory in the eastern province of Zhejiang, spent tens of thousands of yuan to rent a booth this year, but he’s not travelling with great expectations.
“Fewer and fewer buyers from Europe and the U.S. have been coming to check our products in recent years,” Lin said.
“A big Western supermarket buyer used to send five-to-eight people, dressed in nice suits. I only saw one or two of them in recent years and they were just looking around.”
Some $22.3 billion worth of deals were signed at the last Canton Fair in October, up 2.8% on the April 2023 show – which was the first after three years of pandemic disruptions. That’s still well below pre-COVID returns of around $30 billion.
Given the producer price deflation in China, the lower numbers may reflect more of a drop in value than volume. On Friday, more evidence of exporters’ woes were highlighted by China’s dismal March exports and imports, which both contracted.
“Foreign procurement managers coming to the fair will find many prices too low to resist and they will sign many fire-sale-like deals,” Chen said.
“This year’s fair will showcase the contradiction between developed countries’ government preferences and micro-level business priorities.”
Source: Economy - investing.com
