Chinese exporters worry more about the rising cost of doing business at home than trade wars

People visit a nail polish booth at the China Import and Export Fair in Guandgong province, China.

People visit a nail polish and nail printing booth at the China Import and Export Fair, also known as Canton Fair, Guangzhou, Guangdong province, China, Oct. 16, 2018.

Credit:

Sue-Lin Wong/Reuters

Chinese exporters are mostly confident they can weather a trade war with the United States, but worry about the collateral damage it might cause throughout the global economy, according to a Reuters poll of participants at China's largest trade fair.

Representatives from 91 firms involved in sectors ranging from industrial machinery to home appliances, motorcycles and new energy vehicles were surveyed during the Canton Import and Export Fair on Oct. 15-16.

Just over 60 percent said they were worried about the trade war in the first poll carried out by Reuters since the US imposed tariffs on $200 billion worth of Chinese goods late last month, escalating the tariff war between the world's two largest economies.

"We wanted to expand this year into the US, but the trade war has really thrown a [wrench] in the works," said Heidi Tan, sales director at Motoma Power which makes batteries for mobile phones, including iPhones.

Phone batteries have been hit by US tariffs, and Tan says customers are already looking to buy from other countries.

"It is only a matter of time before factories in Southeast Asia will be able to make the same batteries," she said.

Related: The next cold war? US-China trade war risks something worse

Still, firms surveyed remained broadly optimistic about foreign markets despite mounting challenges, with only 28 percent expecting orders to decline this year, and just 21 percent expecting declines in 2019.

When the twice-yearly fair, which draws thousands of companies, was last held in April, a Reuters poll found 65 percent of respondents were concerned about escalating trade tensions, and only 26 percent had anticipated a full-blown trade war.

In the latest survey, more than 60 percent expected the trade war to last at least another year, though some said it depends on how long President Donald Trump remains in the White House.

"The question isn't how long the trade war will last," said Charles Zhu of Taizhou Jieba Cleaning Products. "The question is how long will Trump be in power for."

Fifty-five percent of respondents said the government should "proactively engage in discussions" to try to end the trade war.

Just three respondents thought China should retaliate by restricting competition.

"One massive advantage China has is our ability to work hard and endure hardship, we thrive under competition," said Michael Zhuo of Yuyao Ghost Audio, adding around two-thirds of his customers are in the US.

"I'm not sure whether the US has factored this into their thinking."

Just under half of the firms surveyed had no business in the US.

Knock-on effect 

Many exporters in sectors like solar power and machinery said their shipments to the US were negligible, partly as a result of previous punitive tariffs that forced them to look at markets elsewhere.

But some exporters still expressed worries over how the trade war was undermining confidence globally.

"The trade war, first of all, hurts the Chinese economy, where we have customers, and it could also affect the economies of the countries we do business with," said Todd Cao, vice-president of Jiangsu Spanl Co. Ltd., which exports building materials.

Partly as a result of the trade conflict, economists polled by Reuters earlier this month predicted that China's third-quarter growth will be its weakest since the global financial crisis began in 2007. 

And for many exporters surveyed, the rising costs of doing business in China, including the growing costs of raw materials and high staff turnover, were more worrying than the US-China trade war.

Respondents also listed problems like the crackdown on peer-to-peer lending and tightening environmental regulations.

Some exporters said customers in emerging market economies were suffering from a squeeze on dollars that made it harder for them to buy their products.

"Orders from Turkey, South Africa, Argentina, Iran, Syria and Libya are all down," said Tory Mak, a sales manager at Guangzhou HD Electronics, blaming weakening economic conditions in these countries and knock-on effects from the trade war.

Some firms not directly hurt by the new tariff regime were suffering the effects of other US policy shifts, including the imposition of sanctions on Iran.

Firms in the textiles, electric equipment and solar sectors all said that their business was suffering because they were no longer allowed to export to the Middle Eastern country.

"We've not been hit by the tariffs but by the sanctions, which have cut our trade (with Iran) to zero," said one sales manager who did not want to be named.

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