Innovative exporters at Canton Fair signal China's changing economy

The winners of the Design Awards at the 116th Canton Fair, which opened Wednesday in south China's Guangzhou, include an apple-shaped rice cooker, a felt watch suitable for cold weather, and a tea-brewing device.

The products themselves -- home appliances, bags and watches -- are examples of China's traditional strength in manufacturing. But what makes them stand out is something less common for Chinese exports: innovation and good design.

"Good design can directly generate profits and power," said Liu Yi, general manager of Andon Health, as he demonstrated his company's baby monitor, which won the "best of the best" at the fair's Design Awards.

Designed for working parents to see and interact with their at-home babies via smart phone, the device has hit the shelves of Apple Stores, Liu said, proving the design ability of what started as a contract factory.

"Our company used to manufacture goods for other brands," he said. "After the 2008 financial crisis made business difficult, we started to look for change. Then came mobile Internet and smart phones and we seized the chance to roll out our new products."

At the ongoing Canton Fair, a barometer of China's exports, the turbulent world economy and fears of slowing exports have highlighted the need for brand-building and innovation.

In the home appliance section, Chinese companies touted "world-class technology" in their latest products and said their own technological brands contributed heavily to the sustained growth of their exports.

This year's export environment was not easy on Chinese exporters, who complained about weak external demand, rising labor costs and fluctuating exchange rates. Official data show China's exports in the first three quarters grew by 5.1 percent year on year, down from 8 percent a year before.

Exporters of machinery and electronic products, which make up the bulk of the country's exports, felt the pinch. Their exports so far this year grew by only 1.5 percent, said Shi Yonghong, vice head of the China Chamber of Commerce for Import and Export of Machinery and Electronic Products.

"But I see the gridlock as an opportunity," Shi told Xinhua at the fair. "Enterprises with self-owned brands actually used this process to enhance their competitiveness in the global trade."

Shi's confidence was backed by the industry's export data. Processing trade, which relies on foreign investment and involves little technology, dropped by 1.9 percent. By contrast, general trade, mostly of self-owned brands, jumped by 12.4 percent.

Yu Yi, vice head of the China Chamber of Commerce of Metals, Minerals & Chemicals Importers & Exporters, also said Chinese contract factories had seen narrowed profit margins, but companies with self-owned brands are faring well and still reporting growing exports.

"It is a good sign, suggesting the export slowdown coincided with a shift from processing trade to general trade. It shows our competitiveness has risen," Shi said.

China's booming processing trade has fueled decades of red-hot growth of its exports and economy, but the engine is losing steam, and it is not just due to waning global demand after the financial crisis.

Analysts pointed to an inevitable trend that, as China loses its cheap labor leverage, labor-intensive manufacturing industries are leaving China for other developing countries. This means more overseas competitors to challenge the low price advantage of Chinese products.

But in the meantime, the narrowed profit margins of processing trade have encouraged more Chinese companies to nurture their own brands and focus on technology and innovation.

Last month, Chinese Vice Premier Wang Yang called for encouraging Chinese companies to be more innovation-driven, as the country continues to shape a more balanced and quality foreign trade.

Shi said the technical level of Chinese companies now surpasses that of the majority of the world's countries, though the country still lacks brands that can match Apple and Samsung in terms of technology.

Chinese exporters also see potential in overseas markets for Chinese brands and innovative products, especially in emerging markets outside the traditional consumer giants like Europe and the United States.

"The Middle East and Africa have high demand for our new energy products," said Jerry Pan, project manager of Norinco New Energy, whose booth displays innovative products such as solar energy-driven water pumps.

Besieged by oversupply, anti-dumping and anti-subsidy investigations in European and American markets, China's photovoltaic producers are now trying to explore new markets and develop new technology.

"Competition is fierce in the traditional solar panel market, and our labor costs are high. So we choose to compete on design and ideas. We sell designs that others don't have," Pan said.