High material, components costs push up China export prices: Global Sources survey

More than 70 percent of suppliers increased export prices in 2010; more price hikes are expected this year

HONG KONG, Feb. 14, 2011 /PRNewswire-Asia/--Export prices of various China products are likely to increase in the months ahead, especially if the cost of major materials and components continues to go up. This was highlighted in the latest survey of 232 exporters by Global Sources (Nasdaq: GSOL) (http://www.globalsources.com).

Seventy-four percent of survey respondents said they boosted export prices in 2010, due mainly to higher material and component expenses. One-third of suppliers said costs increased by six to 10 percent last year, while 41 percent reported that materials purchases were 11 to more than 20 percent more expensive.

Fifty percent of respondents said they capped export price adjustments to five percent, while one-third posted increases of six to 10 percent.

With material and component costs continuing to rise, almost one-third of suppliers said they plan to improve the manufacturing efficiency at their factories, while 24 percent plan to implement another round of price adjustments. It is mainly the manufacturers based in Guangdong province that plan to boost productivity.

Twenty-eight percent of respondents in the Yangtze River Delta region and Fujian province said raising export quotes is their primary measure against higher material spending. One-third of exporters in emerging manufacturing hubs intend to hike prices as well.

"In past surveys, suppliers indicated they would make operational adjustments to boost profit margins. This is no longer an option with material and labor costs up across nearly every industry. As a result, we are seeing a larger number of suppliers raising prices and transitioning to produce higher-end products. This is a natural evolution for China's economy, as more makers shift from low-cost supplier to high-quality manufacturer for global brands as well as their own. The need for China exporters to work harder to market themselves and justify their higher prices in terms of service, product quality or production volume is more apparent than ever," said Craig Pepples, Global Sources' President of Corporate Affairs.

Suppliers are taking measures to cope with the rising cost of major materials and components:

• 13 percent of exporters plan to increase their minimum order requirement;
• 11 percent plan to move out of low-end manufacturing and switch to high-end production;
• 10 percent plan to use more locally made materials and components;
• 8 percent plan to use less expensive alternatives to buyer-specified materials and components, and
• 3 percent plan to transfer some or all production facilities to lower-cost inland provinces or nearby countries.

Yuan appreciation not pushing costs down

The yuan has strengthened by about 3.5 percent since June 2010. While this has resulted in higher export prices, manufacturers are also supposed to be able to import materials and components at lower cost. This concession does not seem to benefit the majority of China's exporters.

Sixty-one percent of survey respondents said 10 percent or less of their key materials and components are made overseas. Only 12 percent reported using mostly imported parts.

Manufacturers of consumer goods employ more locally made materials in their products. Sixty-eight percent of surveyed suppliers from the consumer goods sector said no more than 10 percent of their requirement is imported.

Further, 88 percent of survey respondents said they purchase from local agents and distributors of international materials and components suppliers. Only 12 percent import directly from these overseas providers.

Global Sources interviewed 232 China exporters from the telecom, home products, fashion accessories, garments, textiles, hardware, sports equipment and security products sectors in December 2010. More than half of respondents are based in Guangdong, 19 percent are from Zhejiang province and 13 percent from Fujian.

The complete surveycan be downloaded for free at
http://www.globalsources.com/SITE/CHINA-SURVEY-HIGH-RAW-MATERIAL-COST.HTM .

About Global Sources

Global Sources is a leading business-to-business media company and a primary facilitator of trade with Greater China. The core business uses English-language media to facilitate trade from Greater China to the world. The other business segment utilizes Chinese-language media to enable companies to sell to, and within Greater China.

The company provides sourcing information to volume buyers and integrated marketing services to suppliers. It helps a community of over 967,000 active buyers source more profitably from complex overseas supply markets. With the goal of providing the most effective ways possible to advertise, market and sell, Global Sources enables suppliers to sell to hard-to-reach buyers in over 240 countries.

The company offers the most extensive range of media and export marketing services in the industries it serves. It delivers information on over 4.7 million products and more than 262,000 suppliers annually through 14 online marketplaces, 13 monthly print and 18 digital magazines, over 80 sourcing research reports and 20 specialized trade shows which run 57 times a year across nine cities. Suppliers receive more than 192 million sales leads annually from buyers through Global Sources Online (http://www.globalsources.com) alone.

Global Sources has been facilitating global trade for 40 years. Global Sources' network covers more than 60 cities worldwide. In mainland China, Global Sources has about 2,700 team members in more than 40 locations, and a community of over 2 million registered online users and magazine readers for its Chinese-language media.