U.S. market is losing its appeal for China
GUANGZHOU, China: At booth after booth at Chinas main trade fair this week, the refrain from Chinese business executives is the same: the American market is still important, but not as crucial as it used to be.
Chinese producers of everything from socket wrenches to sport utility vehicles say that their fastest growth these days lies in Europe, Africa, the Middle East, South America and elsewhere in Asia. In other words, practically anywhere other than the United States.
Chinese business representatives attending the Canton Fair here are discouraged by the steady decline of the dollar against Chinas currency, which makes it more expensive for U.S. consumers to buy Chinese products. They also point to weaker growth in the U.S. economy and rising U.S. protectionism.
“The U.S. government is still trying to protect its own markets, unlike Europe, which is very free,” said Huang Yasong, the international sales manager for the Hubao Group, a manufacturer of mens shirts that is rapidly expanding sales to Eastern Europe, Russia and Brazil.
The strength of the euro propelled Chinas exports to the European Union market past its exports to the United States for the first time in February.
Hangzhou Jilin Machinery, which makes screwdrivers and other tools, has seen its American sales stay flat, while sales to Africa, Europe, the Middle East and especially Australia are rising.
Zhao Wei, the companys sales manager, puts much of the blame on the fall of the dollar; the Chinese government raised the value of the yuan by 2.1 percent against the dollar in July 2005, and has let it drift up by an additional 5 percent since then.
“Its a big problem,” Zhao said.
To be sure, Chinas exports to the United States are extremely large. They are also still growing and becoming more and more the focus of attention for many Democrats in the U.S. Congress, making it likely that Chinese-American trade friction will persist and possibly worsen in the months ahead.
China surpassed Canada in the first two months of this year as the largest exporter to the United States. According to statistics released by the World Trade Organization last Thursday, China also overtook the United States in the second half of last year to become the worlds second-largest exporter over all, after Germany.
China is still nearly 25 times as dependent on exports to the United States for its overall economic output as the United States is on exports to China. Given that the Chinese economy is less than a quarter of the size of the U.S. economy, it is all the more striking that Chinese exports to the United States are worth more than six times as much as American exports to China.
But the government and companies across China increasingly see the danger of becoming too dependent on a single market. So they are stepping up their efforts to sell to other countries as well, particularly those outside the industrialized world.
Great Wall Motor, a maker of sport utility vehicles and sedans, has more than quintupled exports in two years, to 27,505 last year. Much of that growth has come from fast-growing, oil-rich markets like Russia and the Middle East. “Europe and North America are not our primary markets,” said Wei Jianjun, the companys chairman.
Frank Lavin, the U.S. under secretary of commerce for international trade, said, “China has been making more of an effort in recent years to diversify its export markets.” He noted that Chinas share of all American imports is still climbing, but at a slowing rate.
China also has moved beyond just making huge volumes of T-shirts and toys for affluent Western consumers. It now makes a huge range of industrial goods and transportation gear, from industrial weaving machines to heavy-duty trucks. It exports them in rapidly growing quantities to developing countries, many of which are profiting from soaring world commodity prices and often need the rough-and-ready durability of Chinese products.
China also ships a growing proportion of its goods to Southern Europe. Sales are especially strong to Spain and Italy, where buyers are often less affluent than in Northern Europe.
The shift in Chinese exports away from the United States has been under way for several years. But the trend has accelerated in the past year and particularly in the first two months of this year as the dollar has weakened against the yuan, along with other major currencies.
At the same time, the strength in the euro and other currencies have made Chinese goods less expensive.
China sent more than 31 percent of its exports to the United States in 2000, but that dropped below 24 percent in November and hit 22.7 percent in February, according to a tabulation by Goldman Sachs that includes Chinese goods transshipped through Hong Kong.
