Asia Briefing: Canton Fair battles yuan’s strength

It's a titan among trade shows – the China Import and Export Fair, or the Canton Fair – which attracts buyers and exhibitors from all over the world to southern China, one of the world's great economic cauldrons.

China’s biggest trade fair, which takes place in spring and autumn, has seen a fall in the number of exhibitors this year at both sessions of the event, which has been running now for 56 years.

A big problem facing exhibitors is the relentless rise of the yuan currency, currently €1 is worth 8.33 yuan, and many in the market are gearing up for the renminbi to keep rising.

It recently went to 6.10 yuan to the greenback for the first time in 20 years.

Spiralling costs are also eating into the competitiveness of Chinese manufacturers.

More than 40,000 participants attended the opening of the exhibition, which covers 1.1 million square metres of space, but the number of booths will be 59,539 at the autumn session, while 24,517 companies have confirmed participation, 229 less than in the spring session.

Divided in three
The fair is divided into three phases, with the first phase focused on electronics, household electrical appliances, building materials, and machinery.

The second phase starts in late October, and the third in early November.

Liu Jianjun, spokesman for the fair and deputy director of the China Foreign Trade Centre, said the decline in the number of those taking part was due to a weakening global economy.

“China’s foreign trade is undergoing a tough transition period, and we hope to support more potential companies to lead the whole upgrading of Chinese manufactures,” said Liu.

Organisers are trying to boost brand names and big companies.

Rising currency
Buyers and exhibitors at the Canton Fair are anticipating a further strengthening in the next 12 months, making yuan-denominated goods even less attractive. The stronger yuan has hit buyers from emerging markets like Russia, Indonesia and India, particularly hard.

For the first time ever, transactions are being announced in the form of yuan settlement, part of efforts to boost the yuan’s internationalisation.

“Transactions conducted with yuan-denominated settlement will also help promote the yuan business of Chinese exporters during the fair.

“It will help avoid losses caused by a stronger yuan,” said Mr Liu.

Rising costs mean the Pearl River Delta region around Hong Kong and Guangzhou, where the fair is held, is set to lose many of the low-end garment manufacturers to places like Cambodia, Vietnam and Bangladesh, and the challenge is now to retain higher value-added manufacturers, such as those in the electronics or pharma sectors, and to lure new ones.