Tough times but big profits in furniture

While the furniture industry of Guangdong province is benefiting from massive government-subsidized housing projects, it has to cope with a softening domestic economy, a weak global economy, rising costs and the appreciation of the yuan.

The Guangdong Furniture Chamber of Commerce and Guangdong Furniture Industry Institute make the points in their joint report on the industry.

Sizable furniture enterprises in Guangdong generated 130.288 billion yuan ($20.68 billion) in output last year, a year-on-year rise of 17.8 percent, according to the report.

Statistics from the Guangdong Furniture Industry Association indicate the output from the sector in the province stood at 280 billion yuan last year, increasing by 14.3 percent year-on-year and accounting for 27.7 percent of the national total.

Furniture exports from Guangdong rose by 10.4 percent to $14.93 billion last year, which made up 38.4 percent of the national total, according to Guangzhou Customs.

The growth, achieved during an adverse global market, is mainly attributable to a positive turn in the US and European economies toward the end of last year, said Guangzhou Customs.

A strong export growth came from the Association of Southeast Asian Nations thanks to the zero-duty policy and trade-facilitating measures resulting from the building of the China-ASEAN Free Trade Area.

Despite these relatively encouraging results, profit margins in the industry were eroded by the rising costs of labor and raw materials and the appreciation of the yuan. Some export enterprises recorded a more than 40 percent drop in profit margins in the year, according to the joint report.

The Guangdong Furniture Industry Association predicts that the output of the provincial furniture sector will go up by 14 percent this year.

Uncertainty in the world economy, the domestic property market and the amount of investment in infrastructure affect Chinese furniture makers, said Zhu Changling, director-general of the China National Furniture Association.

On the domestic side, the still-rising property market, although at a lower rate, massive government-subsidized housing construction nationwide and a policy to encourage housing construction in rural areas are positive factors, said Chen Shuihe, an adviser to the Guangdong Furniture Chamber of Commerce and Guangdong Furniture Industry Institute.

The Guangdong Furniture Chamber of Commerce and Guangdong Furniture Industry Institute suggest that furniture enterprises carry out further reforms and counter the impact of rising costs of transport, labor, raw materials and the appreciation of yuan.

It should also try to make breakthroughs in mergers and acquisitions and explore markets in third- and fourth-tier cities in China.