Firms facing up to tough reality

Updated: 2011-11-23 09:40

By Ding Qingfen (China Daily)

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Change is vital in bleak financial times, Ding Qingfen reports in Guangzhou, Guangdong province and Hangzhou, Zhejiang province.

Firms facing up to tough reality
Firms facing up to tough reality

Chinese exporters are finding they must transform their businesses if they wish to survive the turbulent global economy. It doesn't matter whether the products are silk goods (shown at a summer trade fair in Guangzhou), furniture (made in Dongguan, Guangdong province) or something else entirely. [Photo/Xinhua, China Daily]

When the global financial crisis hit three years ago, many Chinese exporters crossed their fingers and hoped things would soon get better. Conditions have gotten worse in recent months and the waiting game is over for companies that want to survive.

"Time is pressing. We have to invest more in technology and innovation to make our goods more competitive in the global market," said Zhou Haichang, president of Guangdong-based Guoguang Electric Co Ltd. "This is the only way out, for Guoguang and most exporters."

Business leaders and government officials are driving home the message: Upgrade. Reform. Improve quality. Innovate.

But how? Some companies are shifting markets, adding forward-thinking business lines, revamping their structures or setting up operations overseas.

Such major changes aren't easy, especially for smaller companies, but they are vital. "The way ahead could be paved with thorns, but there is no other choice," one observer said.

Guoguang is China's leading provider of speakers and amplifiers, and its clients include the big names of Bose, Sony and Philips. Business last year in the United States, the European Union and Japan totaled $270 million.

During the first half of this year, sales grew by more than 30 percent from a year earlier - largely because 2010 was so bad - but the second half "should not be pleasing, with sales level with last year at best," Zhou said.

"The worst time since the financial crisis is coming. To be frank, I am very worried about it."

The headwinds

According to the General Administration of Customs, China's exports are still increasing year-on-year, but at the slowest pace since December 2009. At a recent news briefing, Ministry of Commerce spokesman Shen Danyang cited downward pressure from the global slowdown, growing corporate costs and trade protectionist measures, including anti-dumping and anti-subsidy cases.

"China will try to stabilize foreign trade policies to stabilize the growth of exports and encourage exporters to build their own competitiveness by improving technology, brand, quality and services," he said.

The European debt crisis, which started in Greece, is spreading. Mark Carney, new chairman of the Financial Stability Board, the international association of regulators, warned the stresses in the eurozone were creating financial volatility worldwide that would drag down global economic growth.

In the US, the Federal Reserve recently lowered the forecast for its economic growth through 2013. It cited high unemployment and low consumer confidence among the reasons.

In China, currency appreciation and rising costs are squeezing profits for exporters and suffocating some of them. The yuan has gained around 10 percent against the US dollar since China ended a two-year peg to the dollar in June 2010.

The Ministry of Human Resources and Social Security said that, by the end of September, 21 local governments had raised the minimum wage by an average of 21.7 percent, although Chinese labor costs are still comparatively low.

Zhou, from Guoguang Electric, said, "Because of currency appreciation, nobody wants to make and accept long-term orders. I know some small industrial players have died out, as they were incapable of innovation, and many others are very anxious."

But who knows, he said. Maybe the situation has gotten severe enough that more businesses will hear and heed the alarm.

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