Furniture industry uncertain

GUNAGZHOU: The global economic recession did not stop furniture makers in South China's Guangdong province from attending a recent furniture trade fair in Guangzhou.

"The global market has receded significantly, however, I don't think hibernation through this economic winter is a good option," said Xie Weiming, managing director of Foshan Daming Furniture Co Ltd, during the 23rd China (Guangzhou) International Furniture Fair.

"We will take advantage of the event to show off our rich range of products, our design capability and to further build up our own brands," he said. "Overseas buyers confidence in their partnerships with us will remain high."

Xie said his firm also targeted the domestic market at the event.

He said his export business was hurt but not fatally wounded by the global financial crisis.

"I expect to make up the losses in overseas markets with gains in the domestic market," he said.

But other furniture makers at the fair were less optimistic than Xie.

"I attended the show simply to avoid any sort of misunderstanding from my partners that my business had collapsed amidst the global financial woes," the head of a Dongguan-based furniture firm, who would only give his name as "Wu", told China Business Weekly.

Wu said he recently downsized over 10 percent of his operation.

"The overseas orders we have received in the past couple of months are down by half from what we were getting about a year ago. We have no way to survive but to downsize our production and to save every penny we can," he said. "I think the challenges are much more severe than in 2003 when SARS broke out."

"I've relied so heavily on overseas orders that I don't think I have the experience, the professionals or the sales channels to crack the domestic market as many experts have suggested," he added.

Over 1,500 Chinese and international firms attended the fair, which was held in two phases from March 18 to 21 and March 27 to 30. About 70 percent were from Guangdong.

"It was more difficult to secure the exhibitors. Few booked ahead or put much effort into decorating their booths," said Yu Yi, a manager with the China Foreign Trade Guangzhou Exhibition Corp, which managed the fair

And both exhibitors and buyers were more cautious than before in their bargaining, added Yu.

Many furniture industry insiders are equally pessimistic, including Wang Ke, vice-chairman of the Guangdong Furniture Association.

At a seminar during the event, Wang said that the Guangdong's furniture industry will suffer from the slowing global economy and the sagging domestic real estate market.

"In my opinion it is hardly possible that the industry in the province will bottom out until the third or even fourth quarter of this year," he said.

"Those original equipment manufacturers (OEM) and original design manufacturers (ODM) may have an even harder time in 2009 and closure may be inevitable for some large businesses as well as smaller ones."

About 40 percent of the furniture firms in Guangdong lost money in 2008 and over 30 firms, including a dozen foreign-funded ones, either closed down or moved out of Guangdong, according to the vice-chairman.

The export business will continue to slow as overseas demand keeps dropping, and international trade protectionism begins to gain traction in developed countries, while the domestic market will be saturated with cut-throat competition, said Wang.

"Many furniture makers have switched attention to the domestic market," he said. "The intensified competition may lead to undercutting practices, especially since the domestic market is not particularly dynamic right now owing to the stagnant real estate industry."

Guangdong's gross furniture sales revenues were 184 billion yuan in 2008, (accounting 28.4 percent of the nation's total) and its furniture exports were worth $11.55 billion (41.9 percent of the country's total).

(China Daily 04/13/2009 page5)