Competition and protectionism dim China's ceramic industry

Though autumn is just arriving in China's warm south, local ceramic firms have already felt the chill.

Su Jiandui, general manager of the artistic ceramics business of Longpeng Group Co., Ltd, a leading ceramic firm in Dehua County in east China's Fujian Province said times are tough. "[On average] one household would buy two sets of tableware each year when we exported our products to European and American markets in the past. But they are buying only one in two years now."

Su is not alone. "Some who had been in the business for more than a decade have turned to real estate or mining," he said.

Dehua, the biggest ceramic artware manufacturer and export base in China, has more than 14,000 such firms with over 100,000 employees and a total annual output value of 10 billion yuan (1.6 billion U.S. dollars).

But due to a lack of self innovation, producers have not been able to make good profits as most products exported are of low quality, said Su Yuqing, vice head of the economic and trade bureau of Dehua County.

"Dehua's ceramic industry has been dominated by small and medium-sized firms, which account for 70 percent. The homogeneous products and low threshold for market access lead to fierce competition, which ends up with narrow profits for all," said the official.

Su Jiandui's factory has some 1,000 workers, about one third of what it used to hire.

"The gross profit rate is only 10 percent. Many ceramic companies are running with zero profits," Su said.

Dehua mirrors the situation of the whole industry across the country. The gross output value of China's ceramic industry rose to 583 billion yuan (94 billion U.S. dollars) last year from 275 billion yuan (44 billion U.S. dollars) in 2007, with an average production growth rate of 10 percent.

China, though it produces about 70 percent of the world's household ceramic ware, is much less competitive in the world market.

According to China Ceramics Industrial Association (CCIA)'s website, Brazil has indicated that it will impose anti-dumping duties on Chinese imports of domestic ceramics.

The ruling will affect more than 1,000 Chinese ceramic firms and cost them 70 million U.S. dollars.

This is not an isolated case. Over the past few years, the European Union, the Republic of Korea, Indonesia and Argentina all have taken various anti-dumping actions against Chinese ceramic products.

Shadowed by trade protectionism, ceramic businesses in Dehua have seen fewer orders from overseas and more stockpiling this year.

It has been suggested that Chinese ceramic exporters should focus on emerging markets.

To Guo Xinduan, technological innovation is key to improve the industry's outlook.

The vice general manager of Dehua Chunqiu Ceramics Co., Ltd is forming a research and development team to develop fine china such as ceramic bearings, which he estimated would bring the company tens of millions of yuan in output value.

"We must upgrade our technology to face diversified competition in product and sales channels," he said.

His decision is echoed by others.

The major task of China's ceramic industry is to speed up structural adjustment, transformation and upgrading, said Du Tonghe, president of CCIA, at the trade guild's sixth convention held in Harbin, northeast China's Heilongjiang Province, in July.