SMEs eye emerging markets for export growth

Nearly 70 percent of Chinese small and medium-sized enterprises, or SMEs, expect their export sales to increase in the following three months even though they are pessimistic about the global economic prospects, according to a recent survey.

Of China's SMEs that rely greatly on exports, 79 percent said they expect global economic growth to remain the same or to slow during the next three months, said the survey of 1,017 Chinese SMEs.

The poll was conducted by TNS Inc, an international data communications company, and PayPal Inc, the online payment arm of online shopping company eBay Inc.

Despite the SMEs' lukewarm sentiments about the economy, 69 percent said they expect their sales to increase during the period as they expand into emerging markets, increase their online presence and take other measures.

China has seen its foreign trade slow this year. During the first seven months of 2012, its exports rose by only 7.8 percent year-on-year. In July, its exports went up by only 1 percent, the lowest rate of increase since 2009.

Premier Wen Jiabao warned last month that the country's economy is still under pressure and its economic slowdown may continue for some time.

However, a majority of the SMEs surveyed remain optimistic about their exports and continue to search for ways to increase their revenue.

"The plan to grow the business is not the old style of cutting price. Their goal is to grow into new emerging markets," said Alan Tien, PayPal general manager for China. About half of the companies in the survey use PayPal in sales transactions.

Of the SMEs polled, 77 percent said they will respond to the economic headwinds by looking for new markets. Meanwhile, 65 percent of the respondents said they plan to increase their presence online, while an equal percentage said they plan to offer a more diverse selection of goods.

Zhejiang Sanle Plastic Co, a Zhejiang province-based company that makes plastic products, is one of the many companies that is expanding into emerging markets.

Eighty percent of the company's business comes from overseas. Faced with a decline in that source of demand, Yu Mulin, who founded the company with her husband in 2000, has started to look for opportunities in emerging markets.

"We used to wait for the clients to come to us," she said. "Now, though, we are going out and trying to attract clients, especially some in less-explored markets."

About 1 percent of the company's sales come from emerging markets, and its clients include the Japanese cosmetic company Shiseido Co Ltd and the US software company Microsoft Corp.

Chinese companies have increasingly been using e-commerce to send exports to Latin America, Eastern Europe and the Asia-Pacific.

From July 2011 to June this year, e-commerce exports to Argentina increased by 96 percent, to Israel by 72 percent and to Ukraine by 71 percent, according to PayPal figures.

Out of the 40 million SMEs in China, only 5 million are export-focused, according to the National Bureau of Statistics, and the SMEs that use e-commerce to export are still a fraction compared with the total.