The riddle of the missing socks

By now Chinese exporters are usually taking Christmas orders, but this year any sign of early cheer is absent

If you have ever trawled through a drawer of odd socks looking for their missing partners, you will appreciate Hong Tingjie's problem. The sock maker has the socks; it's just that he cannot find the people to buy them.

He Huaming is in a similar predicament. He makes decorations to put on Christmas trees, but while he has no end of razzle, dazzle and glitter to sell, few people out there are showing even the slightest sign of early yuletide cheer.

Hong and He are just two Chinese businessmen who are having to deal with the cold chill that is blowing over the European economy.

One way in which Hong, the marketing director of China Bonas Group, has felt that is that he is traveling to Europe far less frequently because business has simply dried up, so much so that at the end of last year the company shifted its marketing focus to China.

"In 2010 I went to Europe, including Italy, France and Spain at least once every three months to see where the market was heading," Hong says. "This year I have been there once, because my work is focused on expanding the domestic market."

He Huaming, 53, owner of Yiwu Sheng Hua Handicraft Product, says that on the back of the European debt crisis he expects the value of sales this year to fall 30 percent.

"Some old European customers were no-shows this year, and some turned up with smaller orders," says He, most of whose customers are in Europe.

Lu Xiaofeng, owner of Yiwu Xibao Crafts Factory, says that because of the depreciation of the US dollar and the eurozone debt crisis, his industry is suffering, and he expects his company's sales to fall by as much as 30 percent this year.

China's exports to the European Union continued to fall last month, while imports rose slightly, leading to a more pessimistic outlook for Sino-EU trade.

The lackluster trade figures in recent months prompted the State Council to announce a series of measures on Sept 12 to stabilize foreign trade growth.

"We will speed up tax rebates for exporters and make sure that they get the rebates accurately and promptly," the State Council said in a statement released after an executive meeting presided by Premier Wen Jiabao.

The government will also expand the range of export credit insurance and reduce financing costs, while urging commercial banks to enhance trade financing for small and micro-sized companies, and increase credit to qualified exporters, the statement said.

China's exports to the EU fell 12.7 percent year-on-year to $29.84 billion (23.37 billion euros) in August, and imports rose 0.5 percent to $19.47 billion. Bilateral trade fell 7.9 percent to $49.31 billion, the General Administration of Customs says.

Feng Zhengzhou, president of the Shanghai Export Commodities Association, says last month's disappointing performance bodes ill for China's exports to the EU for the year.

"July and August are supposed to be the busiest time for exporters because it is the purchasing season for Christmas. But the figures show there is nothing to expect in the coming months."

Xiong Hou, a researcher at the institute of European studies at the Chinese Academy of Social Sciences, agrees that exports to the EU will remain sluggish.

"August figures are indicators of China's trade performance for the whole year. It seems that trade with the EU is going to be gloomy for the rest of the year."

The debt crisis, which has resulted in falling external demand from eurozone countries and rising trade protectionism, is the main reason for the steady fall in China's exports to the EU, he says.

"The fall in European demand is having a big impact on exports, especially with emerging markets like China."

In the first eight months of the year, exports to Italy fell 26 percent year-on-year; in the case of Germany the fall was 7.9 percent, and with France 8.6 percent.

"The size of the drop in imports to Europe is a big surprise," Xiong says.

According to the European Statistical System, the eurozone economy shrank 0.4 percent year-on-year in the second quarter.

France's central bank says it expects the second-largest economy in the eurozone will lose 0.1 percent of GDP in the third quarter of this year; Italy lost 2.6 percent annualized in the second quarter, the official figure, published on Sept 10, shows, 0.1 percentage point worse than expected.

European countries' use of trade barriers is also hampering China's export growth to the EU, Xiong says.

"It is no surprise that trade friction will escalate as the European economy worsens. The European Commission's opening of an inquiry into the alleged dumping of solar panel products is one example of how European countries are trying to protect their own companies."

Industry insiders say such an investigation risks putting many Chinese photovoltaic companies out of business.

The State Council statement said the government will also properly defend exporters against trade frictions, while launching trade remedy investigations to protect domestic industries.

The fall in China's exports to the EU is the main reason for the country's sluggish overall export performance this year, says Shen Danyang, spokesman for the Ministry of Commerce.

China's trade rose only 0.2 percent to $329.29 billion last month year-on-year; exports rose 2.7 percent to $177.97 billion, and imports fell 2.6 percent to $151.31 billion. Adjusted seasonally, exports fell 1.7 percent and imports fell 2.9 percent.

In the first eight months of this year trade rose 6.2 percent year-on-year to $2.5 trillion. Imports rose 5.1 percent to $1.19 trillion, and exports rose 7.1 percent to $1.31 trillion.

"China may be unable to achieve a growth target of 10 percent this year," says Liu Ligang, head of China economics studies at the Australia and New Zealand Banking Group Ltd.

Contact the writers at yanyiqi@chinadaily.com.cn and linjingcd@chinadaily.com.cn

(China Daily 09/14/2012 page3)