OUTSIDE the cavernous trade exhibition halls on the outskirts of Guangzhou, south China, hundreds of eager young locals touted their services as translators. Inside, thousands of determined managers pushed their products. In the whirlwind of the Canton Fair, it looked like business as usual.
Wan Yianhong, the tough-talking manager of Nanchang Zerowatt Electric, a maker of fridges and freezers, saw it differently. She said evidence of faltering demand was everywhere.
“Three years ago we exported more than 100 containers a year to Britain,” she said. “Our biggest customer was Argos. But now we are doing only five.”
Wan waved her hand dismissively at the crowds of buyers, many of whom hailed from China’s new customer base — India, Iran, the Middle East and Africa.
“A lot of them just ask us the price and then move on,” she sighed. “Before, buyers gave us orders on the spot with letters of credit; now, because of the global slowdown, buyers are much more cautious on price.”
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China’s import and export figures tell a story that is being tracked by markets and investors around the globe.
In September, exports fell 3.7% from the same period last year. Imports collapsed by 20% compared with a year earlier. Combined, exports and imports fell 8.1 % in the first nine months of this year.
On the surface, it lends fuel to fears about world growth.
Domestic demand in China has deteriorated. The country cannot shake off factory gate deflation and overcapacity. Economists expect the government to concede that growth is at its slowest for 25 years, coming in under the official target of 7%.
“Downward pressure is very strong and the situation is very complicated,” said Xu Bing, the spokesman for the fair. “Trade continues to weaken as the global economic recovery is slow. The situation is not at all optimistic.”
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But a survey of the fair, including interviews with Chinese exhibitors and foreign buying agents, indicated that pessimism may be overdone, that demand may not be falling off a cliff and that many of China’s smarter entrepreneurs are fast adapting to new challenges.
That reinforces the view of financial analysts who say the trade figures were distorted by currency speculation and by a sharp fall in commodity prices. Exports to all big markets actually rose slightly in September, and China’s trade surplus of $60.3bn (£39bn) beat forecasts of $46.8bn.
Statistics in the world’s second-largest economy are unreliable, so the Canton Fair — this is the 118th — has become what financial newspaper the China Economic Times calls “a barometer of China’s foreign trade”.
Officially known as the China Import and Export Fair, it has been held twice each year since the Communist party opened its first window on the world of commerce after winning the 1949 revolution.
The fair hosts 24,700 companies at a sprawling purpose-built complex of 11.8m sq ft in Guangzhou, a port city and the commercial centre of southern China’s Guangdong province.
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At the spring fair last April, deals worth $25.08bn were struck, officials said.
But the numbers of exhibitors and buyers were both down this weekend. Xu said: “Both purchasers and deal totals will be down.”
The Chinese president Xi Jinping will put trade in the best possible light when he visits London on a state visit this week that includes a speech to the Lord Mayor’s banquet in the City.
Xi is fighting a political battle to rebalance China’s economy away from the export-dependent model, of which the Canton Fair is a long-time symbol, to a market economy built on consumption and services.
Chinese analysts say that in recent months a revival of internal party tensions has sidelined premier Li Keqiang, who is nominally in charge of economic policy. Conflicts at the top appear to have fortified resistance among vested interest groups towards economic reform, but the Chinese leader conveys confidence in his power to see through the transition.
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Xi fosters a twofold vision of China’s future trade: a Silk Road belt reaching out to markets in Central Asia and the Middle East; and a maritime Silk Road, harking back to the days when junks plied between Guangzhou and the Indian Ocean.
“In the past two years, the belt and road initiative has been eagerly embraced by . . . the more than 60 countries along the route and it is gradually reaping early benefits,” Xi told a conference in Beijing last week.
According to Liu Yunshan, who sits with Xi on the seven-man standing committee of the Politburo, trade between China and those countries reached $570bn in the first seven months of this year.
Chinese leaders are keen to broaden their traditional markets, blaming the developed economies for their own slowdown.
“The developing countries are to blame because their recoveries are slow and are not creating demand,” complained finance minister Lou Jiwei.
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Many Chinese companies are not waiting for government initiatives or global economic forces to rewrite their worn-out business models.
In one corner of the fair, Thomas Beeckmans, a sales manager for Naeo-Aroma, explained that his Belgian company teamed up with a Chinese manufacturer of ceramic and glass aroma diffusers to handle design, sales and marketing for European clients.
“We find it a very effective way to communicate with customers, and we put design as the top priority,” he said.
Robert Ding, vice president of J & R Electronics, whose firm works with Beeckmans, said Chinese firms would raise their game. “In the past we relied on low labour costs to compete in global markets. Since 2008 we’ve realised that we have come to the end of that road. Labour costs in south Asia and southeast Asia are cheaper than China. If Chinese products are to keep their market share we must raise our level of technology and innovate,” he said.
Nobody should underestimate the Chinese talent for spotting an opportunity. The maker of China’s top-rated hard liquor, a fiery spirit called Moutai, has capitalised on the fact that Vladimir Putin has given it his praise. Now the company, based in south China’s Guizhou province, will sell bottles in Moscow at a premium price of more than £90 each.
Some business people, however, yearn for the old days of a cheap currency, cheap labour and apparently endless demand from the West.
“I blame the government for letting the renminbi appreciate,” said Bai Rong, the feisty general manager at home appliance maker Home Boss. She would not be deterred by mention of the 3% devaluation of the renminbi in August, which shook markets around the world. “It’s like throwing a cup of water on a cart of burning firewood,” she said scornfully.