A 10 per cent fall in the yuan’s value against the US dollar over the past 15 months has done little to boost sales of Chinese goods abroad, according to dozens of exporters at the country’s biggest trade fair.
The Chinese currency has depreciated steadily against the greenback since the People’s Bank of China devalued the yuan by 1.9 per cent on August 11 last year, hitting a multi-year low of 6.77 yuan to the dollar on Monday. But Chinese exports, in dollar terms, shrank 7.5 per cent in the first nine months to US$1.5 trillion. Even in yuan terms, exports dropped by 1.6 per cent.
While it is debatable how much a weakening currency can boost exports, Chinese exporters attending the China Import and Export Fair in Guangzhou, also known as the Canton Fair, played down the exchange rate’s role and said they were pinning their hopes on stronger offshore demand and better products.
Todd Zhao, a veteran salesman with aluminium panel maker Shanghai Huayuan New Composite Materials, said a cheaper yuan was no help if there was no demand from overseas buyers. “But a fall in the yuan is good in a sense if it makes our products cheaper in the global market to woo customers,” Zhao said.
“We have lowered our prices in dollar quotes for foreign clients because of the yuan’s depreciation but we haven’t seen immediate results.”
Guangzhou Taiji Electronic’s booth was one of the busiest at the fair, drawing interest with its “automatic manicure machine”, a compact device that can print a pattern for a nail in seconds.
Sales supervisor Billy Li said the profit margin on the relatively new product was fat but the yuan’s exchange rate was not the main factor.
“The important thing is the product and timing of the market. If my product proves popular, there will be big manufacturers making similar models in six months, and the profit margin will become very thin,” Li said.
A dozen Chinese exporters at the fair, which opened just over a week ago, said they were more concerned about economic conditions overseas. Darren Xiao, a sales consultant with furniture maker Oppein Home, said “economic conditions in importing countries” would determine his firm’s business.
Robin Chen, from Xiamen-based LED lighting supplier Leedarson in charge of sales to Russia and Eastern Europe, said the yuan’s depreciation in the last few months could not make up for the fall in sales prices for LED light bulbs.
“Bulb prices have dropped about 30 per cent this year, and demand is still weak, especially in Russia,” he said. “The yuan’s fall has sometimes put us in an awkward position because buyers ask for a lower price in dollars but our raw materials costs are not coming down accordingly.”
Overseas buyers at the fair said China was losing its low-cost advantages.
Stanislav Koroed, a Russian buyer of lighting products, said some Chinese products were still more advanced but it was increasingly cheaper to make things in Russia than in China.
Another problem is the range of products at the fair. Craig Hicks, an Australian distributor of audio and video equipment, said he failed to find “a single new product” at the fair.
“There is not much innovation here … If you look at the speaker products, they are all the same,” Hicks said.
But the yuan has performed better against a basket of currencies than against the dollar.
“An appropriate depreciation in the yuan can help China’s domestic economic stability … and it’s a wise decision to keep the status quo of yuan depreciation,” Everbright Securities’ Xu Gao said.