According to business-to-business media company Global Sources, 76 percent of mainland China manufacturers plan to increase export prices in 2007. For the first half 2006, 70 percent indicated that they would increase export prices.
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“Price competition is the top concern among mainland China’s exporters,” said Michael Kleist, general manager of Content Development at Global Sources. “Another major challenge is the cost of key raw materials. The greatest increase was seen in brass, which last year triples from its May 2005 level.”
Price competition was cited as a major challenge by 35 percent of the suppliers that participated in the study, followed by higher material costs with 34 percent, design copying/piracy with 16 percent, labor shortages with 11 percent and stricter overseas standards with 5 percent.
“Despite higher costs and lower margins, most manufacturers are planning to limit prices increases to less than 10 percent to compete for buyer orders,” Kleist added. “Most manufacturers have indicated that the appreciation of the yuan is not a major concern. It only has a small impact on the cost of finished goods and can easily be overcome by strengthening competitive advantages in other areas.”
When it comes to sales outlook, suppliers remain positive, with 78 percent expecting large sales increases, compared to 68 percent in the previous survey.
“In this survey, 78 percent said they expect sales will increase by 5 percent or more in the coming 12 months,” Kleist said. “Additionally, more than 41 percent of respondents plan to increase production capacity by more than 20 percent. That compares with just 32 percent planning such increases in the previous survey.”
According to the survey, 49 percent of suppliers plan to target the EU for exports, 25 percent are targeting the U.S., 10 percent are focused on Asia, 7 percent intend to export to the Middle East/Africa and 9 percent indicated that they will focus on non-EU European and other countries.
“Because shipments to the EU generate the highest margins, nearly half of manufacturers are focusing on exports to the region,” noted Kleist. “Even the higher cost of complying with the EU Restrictions on Hazardous Substances (RoHS) hasn’t deterred suppliers. In fact, many medium and large exporters welcome the restriction as an opportunity to grow exports, as competitors unable to meet the requirements drop out.”