Economy

Fair enough

Guangzhou’s trade gathering is no longer the only game in town

Visitors explore the booths inside one of the exhibition halls of the Canton Fair in Guangzhou

Fewer deals signed this year

The Canton Fair is often described as a barometer for China’s export health. So when the signals are that business is dropping, commercial confidence often takes a hit. But does the fair still serve as a reliable indicator? Or could the barometer be broken and no longer capable of divining the true economic weather?

Organisers of the twice-yearly event in Guangzhou, which is also known as the China Import and Export Fair, called time on its most recent session at the end of last month. But the two-week gathering has an enduring status, as Kevin McGeary describes in The Nanfang, a blog about the Pearl River Delta. Starting out under Mao Zedong in 1957, the fair came to be regarded as the fulcrum in China’s economic progress. Doing just $1 million worth of business in its first year, it was accounting for as much as a fifth of exports by the mid-1980s. Business volumes then soared during the 1990s as China integrated more deeply into the global economy.

Foreign attendees braved hostile political conditions in some of the earlier meetings, McGeary writes, especially during the Cultural Revolution when Red Guards plotted to disrupt the gatherings.

When the Americans first turned up in 1972, they had something to learn from the Japanese, who had been coming to Guangzhou for a while. To keep things civil, Japanese businessmen weren’t averse to chanting “Long live Chairman Mao”, McGeary says, and as late as 1999 the country’s trade minister was ready to sing a few of the old revolutionary songs with his hosts.

But turnover in Guangzhou has now been declining for three years, the Global Times reports. About $31 billion worth of deals was recorded at this session, which was a 12.6% decline on last spring. The number of overseas buyers also fell to a little over 188,000 visitors. Fair spokesman Liu Jianjun blamed a slower-than-expected recovery in traditional markets and low demand in emerging ones.

Of course, the fair is no longer the only option for traders, with hundreds of other exhibitions and conventions springing up across China. Many buyers and suppliers now have long-term relationships, making the need to visit China less pressing too.

“The function of the fair seems to have changed in recent years,” Wang Changyin, general manager of trading at Galanz Group, a home appliance retailer, explained to the Global Times. “It is now more like a platform to display new products or enhance brand recognition internationally. Fewer and fewer foreign participants are willing to sign deals on the spot.” The South China Morning Post also identified differences to former fairs, like less evidence of hard bargaining over price and more focus on the range and quality of goods. “Products are of better quality but of course they are more expensive,” an importer from New Zealand told the newspaper. “It’s true that there are cheaper products in Thailand and Vietnam, but the quality is poorer for the type of products I source.”

The fair is also losing out to new sales channels, most notably online platforms like Alibaba. According to iResearch, a Beijing-based market research firm, Chinese companies contracted deals worth Rmb3.1 trillion ($497.6 billion) with foreign partners online last year, up from Rmb2 trillion in 2012. “Before there was no internet so customers had to come to the Canton Fair, but now it is easy to get information [online] so there is no need to come,” Lina Shang, a sporting goods trader, told the Financial Times.

But other attendees in Guangzhou spoke up for face-to-face meetings, especially in trading higher value or less standardised items. They were also cautious about some of the anonymity of online sales platforms. “We tried to use the internet before, but now we have stopped,” a Walmart supplier told the FT. “In China, there are lots of cheaters.”


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