x Abu Dhabi, UAESaturday 22 July 2017

UAE proves a major draw for China as trade grows

The largest regional exhibition for Chinese home products companies in Dubai showed just how strong bilateral business has become between this country and the world’s second-largest economy.

Trade between the UAE and China surpassed $40 billion this year, much of this fueled by wholesale orders of Chinese products to the UAE. Lee Hoagland / The National
Trade between the UAE and China surpassed $40 billion this year, much of this fueled by wholesale orders of Chinese products to the UAE. Lee Hoagland / The National

The China Homelife Show that ended on Thursday at Dubai International Convention and Exhibition Center is the biggest regional showcase for home products, as hundreds of Chinese companies hustle for business in the Middle East.

The three-day fair covered a vast range of products, ranging from furniture, interior decor, kitchens and baths to home appliances, textiles, apparel and fabrics, gardening appliances, products for mothers and babies, even fitness equipment.

The property and construction boom in this country especially has fuelled unprecedented demand for home products to furnish the new apartments and office buildings that have sprung up and this translated into strong demand to exhibit at the China Homelife Show.

Since its launch in 2010, the show has seen a 300 per cent increase in exhibition space with attendees reaching a total of 6,000 last year.

“Our main aim is to promote exports of Chinese manufacturers to emerging markets,” Binu Pillai, the Shanghai-based chief operating officer of the organisers Meorient International Exhibition, said ahead of this year’s show.

“China Homelife Show is a new generation B2B platform to achieve this goal. We have a number of tools to deliver the right partners for our exhibitors including the VIP buyer programme [a hosted programme for visitors to the GCC], the match-making programme etcetera,”

The big-selling home products are furniture, home textiles, portable electronics and arts and crafts, with the main exhibitors being medium-to-large manufacturers of textiles and garments, furniture, lighting, kitchen and bathroom products as well as home decoration.

A large majority of today’s customers make their purchasing decisions based on return on investment (ROI).

“China today has access to technology and designs and have the manufacturing capability to deliver volumes within short time periods.

“This has worked in China’s favour specially when you consider the volume of scale,” said Mr Pillai.

Some factory managers say each year they have to raise salaries by 10 to 15 per cent to hire workers, even as multinational firms such as adidas and Nike have relocated production bases to South East Asia, where wages are relatively lower.

Mr Pillai conceded manufacturing costs in some Chinese cities were going up, especially as labour costs become more expensive.

“However, China still has the price advantage compared to many other countries,” he added.

“Many other countries are not able to match the design verity, choice of materials and delivery times China can offer. Large volumes are helping Chinese suppliers keep the price low as well.”

Still, during the first three quarters of this year, exports of Chinese home appliances declined and there is still no visible sign of an recovery, says Zhang Qingfu, the head of the Middle East and Africa overseas business division of Haier Group, China’s largest home appliance manufacturer.

“The next three to five years will be a difficult transitional period for China’s foreign trade industry,” he says.

Part of the reason for that is because China’s focus these days is less on exports and more on building the domestic consumption market.

One example of this is the falling volumes at the biannual China Import and Export Fair, also known as the Canton Fair, China’s largest trade fair and a barometer of foreign trade since it began in 1957.

Last month, the organisers of the Canton Fair reported the lowest export volume since 2009 as the event concluded in Guangzhou in southern Guangdong Province.

The fair spokesman Liu Jianjun told the Xinhua news agency export volume dropped by 3 per cent from the last autumn session of the fair to 194.61 billion yuan (Dh117.32bn), and was down 10.9 per cent from the figure reported at the fair’s spring session earlier this year.

“The decrease from both the spring and last autumn sessions indicated that the world economic recovery remains on an uncertain and unstable course, which continues to challenge the stability and development of China’s foreign trade,” Mr Liu says.

Shen Nanpeng, the founding managing partner of Sequioa Capital China, says in a posting on the Sina website that China’s home products industry has experienced rapid growth in the past 10 years.

However, in the past two years, especially last year, there were huge challenges facing the sector, due in part to controls on the property industry.

Mr Shen says he expects the industry to optimise in the near future after some consolidation and with the end of the country’s property bubble.

A major boon to the home products manufacturing sector is expected from the recent launch of the Shanghai Pilot Free Trade Zone (FTZ), as it will bring improved logistics and better business opportunities to areas such as Yiwu in Zhejiang province, which is home to the world’s largest trading market for small commodities and where manufacturers have been hit by rising costs and dwindling overseas demand from importers and wholesalers.

The FTZ should create more opportunities for small and medium enterprises in Yiwu to export more goods more easily in the coming years. In addition, many manufacturers are banking on burgeoning online sales both at home and abroad.

Last month, new export orders declined somewhat but employment costs and output prices were also down and analysts believe the world’s second-largest economy may be seeing slightly softer growth.

The broader picture remains upbeat, however, and new orders are rising. The Chinese economy is widely expected to top the government target of 7.5 per cent for the full year and this would give a boost to home products manufacturing and exports.

Mr Pillai said China still suffered from a misperception that Chinese products are poor quality.

“China has the ability to produce goods of various quality at a range of price points,” he said.

“Many times the end user pays a high price for a product, which was specifically requested to be supplied at a lower price by the buying house or intermediary. Obviously, the lower price will have an impact on the quality.

“China has access to premium technology and investment capability ensures the use of best machines to produce high quality products,” he said.

“At the end of the day it is up to the customer what quality is requested for.”

business@thenational.ae