China seeks export recovery

China is now losing an increasing number of export orders to other emerging countries because of rising costs at home. That's driving the government to consider supportive measures including tax rebates and reduced transportation fees, a commerce official said on Saturday during an investment and trade expo held in Changsha, Hunan province.

"Rising costs of labor and land as well as enhanced environment protection criteria has reduced the competitive edge of Chinese exporters," said Wang Shouwen, director of the department of foreign trade at the Ministry of Commerce.

Chinese labor-intensive exports, including textile, apparel and light industrial products, increased rapidly in such traditional markets as the US, the EU and Japan before 2010. But the first four months of 2012 saw China's textile and apparel exports to Japan expand only slightly, by about 7 percent year-on-year, while Japanese imports from other emerging countries surged by more than 40 percent in the same period, Wang said.

"Overseas buyers' strategy, called 'China plus one', also contributed to the shifting away of Chinese exporting order. China remained the main supplier for overseas buyers but one alternative procurement source in other emerging countries is established to compare the cost with China.

"Further rising costs at home will drive buyers to rely more and more on their plus-one countries," the director said.

China's exports in the first four months edged up by 6.9 percent from the previous year, 20.5 percent lower than the growth in the first four months of 2011. Trade from January to April slightly increased by 6 percent while the country set a 10-percent goal of trade growth in 2012, according to Deputy Commerce Minister Wang Chao.

The trade outlook is not optimistic owing to sluggish overseas demands and increased trade frictions as well as rising costs at home, Wang said. "In the first four months, about 20 percent of the clothes orders were pulled away to the neighboring countries such as Vietnam and India," said Jin Shulin, a trade manager of Shanghai Textile Decoration Co Ltd.

"Overseas apparel buyers are now buying cloth or lining from China and manufacturing apparel in Vietnam instead of ordering apparel from Chinese exporters because the labor cost is at least 5 percent lower than China in addition to free customs duty to the US market," Jin said.

The urgent exporting situation drove the ministry to urge exporting manufacturers to move to the central and western regions while upgrading industries in the coastal cities with more investment in research and development for higher added value, Wang said.

The central and western regions accounted for 9.9 percent of China's trade in 2010, compared with 90.1 percent in the 10 coastal provinces and cities, according to the ministry.

"If we combine the advantages, well-developed industrial chains in the east and low land and labor costs in the central and western region, we can still keep export orders in China," Wang aid.

However, high logistic costs and heavy transportation fees have held back coastal exporters from moving their manufacturing bases to the central and western regions, according to Wang Zhonghong, a researcher from the Development Research Center in the State Council.

"The ministry will introduce policy adjustments in the next step, including tax rebates and rearrangement of the Canton Fair booths to support exporting manufacturing in the central and western regions. The upcoming logistics conference will reduce transportation fees and lower the exporters' costs," Wang Shouwen said.