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Chinese Firms Adjust Strategies Amid EU Crisis

27/08/2012

China Daily had reported that as European economy continues to slump, lots of Chinese trading companies are trying to adapt their export strategies, with switching focus on product quality enhancement and cost cutting. On the other hand, new emerging markets are also gaining their favor.

According to the latest figures release by China's customs agencies, there has been a marked shift in demand for Chinese goods from various parts of the world in the first seven months of the year. Although latest customs figures of export volumes from Shanghai and Hangzhou showed steady year-on-year growth of 10.4% and 7.6% respectively, traders said business with the European Union has been hit hard.

Jiang Kexing, the manager of Yiwu Hongxu Trading Co Ltd, pointed out that orders from EU clients had dropped at least 30% and lots of trading companies that he knew are trying to improve their profit margins by getting out of markets affected by the European debt crisis.

On contrast, clients in developing economies showed greater interests in trading thus led to more potential orders, according to Jiang.

Along with increasing trading volumes, more and more companies are upgrading technologies being used on production in order to enhance overall product quality.

Cutting cost was also prioritized in many companies too. Shanghai Ruinian Fine Chemical Industry Co. had been introducing various measures to cut production costs and boost efficiency, said Luo Gang, chairman of the company.

He added that to stand out from local competitors, his team has shortened the production process, and applied cheaper materials to reduce costs.

Tu Jun, the owner of a trading company which specializes in exporting gift packaging in Wenzhou, Zhejiang province, said he too has noticed more emphasis from his clients on quality, and he's been doing increasing amounts of business in developing economies such as Chile, Panama and Russia, as business has dropped elsewhere.

Orders from the United States and European countries have dropped dramatically, by over 50 percent, Tu pointed out.

He added that lower material and labor costs in China no longer represent the advantage they once did. So he decided to switch to the middle- and high-end of the market, instead of struggling in the tough competition of the low-end market. "Smaller numbers of quality orders have helped to expand our business," Tu said.

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