Rising China prices boost India, Vietnam sourcing: Global Sources survey

More than 50 percent of buyers intend to increase sourcing from India and Vietnam; Survey also reveals yuan trade settlement is gaining acceptance

HONG KONG, Jan. 24, 2011 /PRNewswire-Asia/ -- A majority of buyers report paying higher prices for products sourced in China, and China's exporters are becoming less competitive with other low-cost countries, particularly in the market of low-end products. These results were highlighted in the latest survey of 385 buyers by Global Sources (Nasdaq: GSOL) (http://www.globalsources.com).

Sixty-eight percent of survey respondents said the yuan's appreciation has affected their China sourcing strategy, with 54 percent indicating higher export prices as a result.

One-third of buyers are expecting the yuan to strengthen further to 6.5 against the U.S. dollar in the next six months, with 29 percent anticipating 6.43.

To deal with the rising China currency, 54 percent of respondents will boost their imports from other countries. Of these, 57 percent pointed to India as their main sourcing alternative. Nonetheless, buyers will still rely on China for orders that have exacting specifications or tight delivery schedules.

"Given the changing price point of China products, China exporters must work harder to market themselves and justify their higher prices in terms of service, product quality or production volume," said Craig Pepples, Global Sources' President of Corporate Affairs.

In addition, buyers will take other measures to cope with the yuan's appreciation and rising China export prices:

• 24 percent of importers plan to raise retail prices;
• 22 percent plan to source fewer items closer to season;
• 20 percent plan to purchase only low-end items from China;
• 17 percent plan to source only midrange and high-value items from China;
• 14 percent plan to peg export prices at a fixed exchange rate; and
• 9 percent plan to use the yuan in trade settlements.

Vietnam, Thailand also emerge as China sourcing alternatives

Thirty-one percent of buyers said they will increase procurement from Vietnam. More than half of these respondents are U.S. and EU-based buyers, with 19 percent from the Middle East. Many of these buyers source mainly consumer products such as hardware and fashion accessories, while some from the U. S. and Canada would purchase personal electronics.

China's apparel exporters are already seeing the effects of the sourcing shift, as Vietnam-made garments are 30 percent cheaper. China's exports of basic apparel, in particular, have been hit hard.

Thirty percent of respondents said they plan to increase sourcing from Thailand. Of these, buyers from the U. S. and the EU each accounted for 24 percent, followed closely by those from the Middle East at 22 percent.

Yuan trade settlement gains wider acceptance

The fluctuating value of the yuan against the U.S. dollar has made it difficult for most China exporters to quote a fixed export price. Settling overseas transactions in the yuan instead of the U.S. dollar is being floated as a possible solution to supplier's pricing problems, but the uptake has been slow.

Only 17 percent of respondents said they are using the yuan in settling orders with their China suppliers. But almost 39 percent indicated their willingness to use the China currency in future transactions.

The main factor preventing widespread adoption of the yuan in overseas trade is the limited availability of the currency in international markets. Forty-eight percent of buyers said the yuan is not available or widely circulated in their home countries.

Global Sources interviewed 385 buyers of various China products, including electronics, home products, gifts and premiums, garments and textiles, and hardware, in December 2010. These buyers are based in China's top export markets, mainly the U. S. and the EU, with additional respondents from the Middle East, Central and South America, and Asia.

The complete surveycan be downloaded for free at

http://www.globalsources.com/SITE/BUYER-SURVEY-CHINA-ALTERNATIVES.HTM and
http://www.globalsources.com/SITE/BUYER-SURVEY-YUANTRADE-SETTLEMENT.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 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.