Cantong Fair: Made-in-China Products Raise Price Together

Yesterday was the first day of 107th session of China Import and Export Fair (Cantong Fair). Though it was cold and raining outside, the atmoshpere inside of the pavilion was pretty liven up. An exhibitor in household applican business told journalist that in the first day, the amount of purchasers coming for enquiry were two to three times as that of last session. The prepared business cards and brochures were not sufficient for distribution. A booth supervisor from Cantong Machinery Import&Export Co. said that the Hong Kong Spring Electronics Fair was just concluded on April 16th, many purchasers were still in Hong Kong. The third day might be a peak of purchasers attending.

The attendence of buyers on the first day verified the economists’ prediction on the global consumer market that there would be a recovery but not robust enough. Journalist learned from Guangzhou trading delecation that their exhibiting enterprises had a turnover of more than USD 80 million on the first day of the Fair, which was a two times increase from the corresponding period of last session. In the pavilion, heated discussions regarding orders were in the process, and their only focus was the Price.

As cost soaring up, exhibitors raised price generally

Before the Cantong Fair, the main concern from exteral was that would the appreciation of RMB affect the price negotiation. But when stepped into the pavilion, journalist found that the worst nightmare of exhibitors was the soaring price of raw materials. In order to keep the profit margin, many exhibitors raised the price. But since the economy is still in the process of recovery, purchasers thought the prices were too high to accept at once. Bargains between buyers and sellers are carried on passionately.

Picture source: radeshow.com

“Since this year, raw materials for wheel tyres have increased their price by 15% to 20%. Meanwhile, all the three mining giants are demanding a 100% raising of iron ore price, which is still under discussion. This caused a 10% increase during these two to three months nationally.” Li Fei, the sales manager of Zhejiang Shine Time Vehical Co., showed a helpless face when mentioned the word “cost”. Because of the 10% increase of raw materials, Li Fei quoted 10%-15% higher than last session. “The quotation was on the verge of losing money. After making it through the test of financial crisis, enterprises been left no longer pursue the quantity of export products, but turn to the quality and profit. Thus to raise the price became a commen choice”, Li Fei even claimed that he prefers raising price to purchase order.

Yu Shuyuan, international business manager of Guangzhou Hedy Holding Co., Ltd, told journalist that the price for computer memories has soared by 50% this year, while the price for hard disks has fallen down. So the altegether cost raised by 10%. “The raised part will definitely be reflected immediately in our quotation sheet.”

Will purchasers accept the raising price? Li Fei expressed that in fact they have already had the expectations on the increasement caused from the raising price of raw materials. If Chinese suppliers bear the burden themselves, the buyers will be extremely happy. “Of course, they will complain anyway saying that the price of the end market could not be raised to its place at once.” After a round of bargain, Li Fei reached the agreements with some of his regular customers to raise the price by around 3%-5%.

Guangzhou Shenglong Electronic Technology Co., Ltd, which engaged in digital image devices has its own way to solve the problems—taking the advantage of the promotion of a series of newly updated products. Their prices are increased by about 5% and are agreeable to most customers.

Exchange Rate of RMB is rarely mentioned

Since the opening of the Cantong Fair, exhibitors have been worrying a lot about the cost. But they didn’t seem quite nervous about the appreciation trend of RMB.

“We will also tell the buyers that the value of RMB may be increased. But it is only a by-the-way topic. Compared with the raising cost, it is, after all, only a prediction. And its amount of increase is far less than the raw materials.” Li Fei, sales manager of Zhejiang Shine Time Vehical Co., told journalist, even if it appreciated, the expected increase would be 1%-2% to the maximum. By contrast, the raising cost is more stressful.

Pu Zhongyou from Guangzhou Shenglong Electronics said that export enterprises who have endured the hardship of RMB appreciation period will no longer be at loss in that situation. A mature enterprise will always keep a profit margin to increase the flexibility and at the same time have some solutions to that problem. Therefore, when discussing the orders, they don’t need to mention the issue of exchange rate. Even if it increased in the future, they will face it honestly.

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