"Price competition is the top concern among mainland China's exporters," said Global Sources' general manager of Content Development, Michael Kleist.
"Another major challenge is the cost of key raw materials. The greatest increase was seen in brass, which last year tripled from its May 2005 level."
Among the surveyed suppliers' biggest challenges ahead:
- 35 percent cited price competition;
- 34 percent indicated higher material costs;
- 16 percent said design copying/piracy;
- 11 percent cited labor shortages; and
- 5 percent said stricter overseas standards.
Kleist added: "Despite higher costs and lower margins, most manufacturers are planning to limit prices increases to less than 10 percent to compete for buyer orders."
"Most manufacturers have indicated that the appreciation of the yuan is not a major concern. It only has a small impact on the cost of finished goods and can easily be overcome by strengthening competitive advantages in other areas."
Positive outlook: 78 Percent Expect Large Sales Increases vs. 68 Percent in Last Survey
Kleist said: "Suppliers are more positive about export growth than in the first-half 2006 survey.
"In this survey, 78 percent said they expect sales will increase by 5 percent or more in the coming 12 months. In the previous survey, only 68 percent projected this level of growth.
"Additionally, more than 41 percent of respondents plan to increase production capacity by more than 20 percent. That compares with just 32 percent planning such increases in the previous survey.
"With sales targets and capacity plans up significantly from the last survey, it would appear Chinese suppliers feel they can maintain solid growth despite higher prices," said Kleist.
Nearly Half of Manufacturers Targeting Exports to the EU
Kleist said: "Because shipments to the EU generate the highest margins, nearly half of manufacturers are focusing on exports to the region.
"Even the higher cost of complying with the EU Restrictions on Hazardous Substances (RoHS) hasn't deterred suppliers. In fact, many medium and large exporters welcome the restriction as an opportunity to grow exports, as competitors unable to meet the requirements drop out."
Among suppliers' export targets for the next 12 months:
- 49 percent plan to target the EU;
- 25 percent plan to focus on the US;
- 10 percent plan to target Asia; and
- 7 percent plan to focus on the Middle East/Africa
The remaining 9 percent expect to focus on European (non-EU) and other countries.
Manufacturers surveyed produce air conditioners, automotive lights, ceiling light fixtures, eyewear, leather garments, massagers, pet products and solar panels.
