Business / Companies

Ceramics makers trying to avoid breaking

By Qiu Quanlin in Chaozhou, Guangdong (China Daily) Updated: 2012-07-11 11:14

Firms adjusting to harsh business environment amid EU debt crisis

Looking at a batch of new ceramic cups in an exhibition room, Cai Xuqing could hardly catch his breath.

"We aren't thinking of the profits we could make from these products, which are in the latest designs," said Cai Xuqing, general manager of Chaozhou Chenhui Ceramics Co. "Instead, we are thinking about how we can find buyers."

The company, based in Chaozhou in eastern Guangdong province, is a privately owned manufacturer that, like many others, has relied heavily on exports to make a profit in the past two decades.

Recent years, though, have brought fewer orders from overseas buyers.

"Our business grew very quickly in recent years," Cai told China Daily. "But we have felt mounting pressure on our exports since 2010. And the situation began to get worse early this year."

Cai's company, which mainly produces kitchen ceramics, saw the value of its exports decrease by more than 30 percent year-on-year in the first five months of 2012, he said.

"Other than the European market, we did not sell products in the domestic market and in emerging markets," Cai said. "That's why we have seen a great drop in sales."

Cai's company is not alone. Chaozhou, a large Chinese ceramics producing and trade center that is home to more than 3,000 private ceramic manufacturers, has been exporting less this year.

The demand coming from international markets has decreased and the value of the city's exports to Europe and the United States in the first five months dropped by 13.9 percent year-on-year, local government sources said.

Chen Lirong, director of Chaozhou Bureau of Foreign Trade and Economic Cooperation's foreign trade department, is not optimistic about the prospect for exports in the second half of the year.

"The European debt crisis is persisting and it is still hard to know what will happen to the renminbi exchange rate in the near future," Chen said. "As a result, we are afraid that a slowing in the pace of exports will continue into the second half of the year."

Chaozhou, whose economy is mainly driven by ceramic manufacturers and other private businesses, saw the value of its exports increase by only 0.4 percent to $1.04 billion in the first five months of the year. That figure was lower than the national rate, which was 8.3 percent, and the provincial rate, which was 6.5 percent, sources with the local customs authority said.

In particular, the value of Chaozhou's ceramics exports reached $346.9 million, a year-on-year decrease of 6.7 percent, the local customs sources said.

"Chaozhou's gloomy performance in exporting ceramics was not an anomaly given that exports in Guangdong and the country as a whole also increased at a slow pace in the first half of the year," Chen said.

The value of China's exports rose 11.3 percent year-on-year to $180.21 billion in June, slowing from the 15.3 percent increase seen in May, the General Administration of Customs said on Tuesday.

In the first six months of the year, the value of the country's exports rose only by 9.2 percent to $954.38 billion, according to the administration.

As demand decreases in Europe and the US, some Chinese exporters have turned their eyes to the domestic market in recent months.

Chen, though, said taking such a step does not offer Chaozhou's ceramic producers an easy way out of their difficulties.

"Europe and the US remain destinations for local ceramic producers, which mostly make high-end products that are tailored to buyers there," Chen said.

The European Commission, the executive body of the European Union, recently conducted an anti-dumping investigation looking at Chinese household ceramics makers.

Afterward, Chaozhou foreign trade authorities began suggesting that local ceramics producers place a greater priority on the domestic and emerging markets.

"But they have found that people in emerging markets such as the Middle East and Southeast Asia can hardly afford to buy their products, which usually have fairly high prices," Chen said.

In the latest anti-dumping investigation, five producers of household ceramics, none of which are from Chaozhou, have been chosen to represent the industry. They have invited international lawyers to help them prepare their case.

Chen said the investigation could affect more than 200 Chaozhou-based household ceramics makers.

After an Indonesian anti-dumping committee conducted a similar inquiry looking into Chinese ceramic tableware and kitchenware products, the value of Guangdong's ceramics exports decreased by 5.9 percent to $490 million in January.

"In the current situation, it is hard to know how much profit will be lost from the European market if the anti-dumping investigation is approved," Chen said.

Up to 40 percent of Chaozhou's ceramic products are shipped to Europe, local government sources said. The value of exports to economies in the Association of Southeast Asian Nations increased by 18.2 percent in the first five months of the year.

Beyond the gloomy prospects for exports, local ceramics manufacturers are faced with another large difficulty - that of shifting from being privately owned to being owned by shareholders, said Ding Yingliang, secretary-general of Chaozhou city government.

"Traditionally, almost all ceramics companies are privately owned and that arrangement doesn't offer much protection from business risks," Ding said.

"We have called on local ceramics producers to introduce modern practices in corporate management, such as hiring international technical and marketing staff and, most importantly, adopting a shareholding system in order to increase their ability to compete and reduce trade risks in the long term."

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