China’s purchasing managers arepessimistic, the shipping companies that call at its ports are disappointed and the country’s rulers are suggesting a higher tolerance for pain. These are among the reasons economists predict another round of weak export data in coming days from the world’s No. 2 economy.
Yet, dire straits also tend to fuel for entrepreneurial ambition, as business owners scrape for new growth avenues.
The smallest trade companies are pinning more hope on tapping sales in emerging markets like South America while pledging to be more flexible about their pricing, according to a survey of clients of Hong Kong trade services firm Global Sourcesreleased on Wednesday.
Markets lack optimism about Chinese economic data these days and are likely to focus this week on fresh economic numbers due in coming days, in particular August trade statistics on Sept. 10. Some economists are estimating that August’s export figure might suggest July’s 1% growth from the year earlier was the cycle’s bottom. Goldman Sachs economist Yu Song, for instance, said in a recent note that China’s exports may show a 3% rise in August. Barclays economists expect export expansion to remain at an anemic 1%.
The segment of China’s export base surveyed by Global Sources has a generally positive outlook. Some 60% of the 506 respondents to a mid-August email survey predicted improved export performance in the second half of this year compared with the same period in 2011.
A decrease in exports was expected by 26% over that period, while 15% expect a flat performance.
On balance exporters in the firm’s annual survey have become less optimistic over the past few years. In a similar survey last October by Global Sources, 93% said they expected rising sales over six months, and only 2% forecast sliding sales. Perhaps also telling: the survey sample was 900 a year ago, suggesting a number became tighter-lipped – or worse, closed their doors – in the meantime.
The optimism-pessimism findings may be predictable. The exporters choosing to answer, after all, are a self-selected group – those “choosing to stay in business,” in the words of Craig Pepples, head of corporate affairs at Global Sources.
Most of the companies surveyed – sellers of electronics, hardware, gifts and garments – export only $1 million to $5 million annually, making them hungry for the best opportunities.
“This is a microeconomic survey that’s looking at the potential winners after this shakeout,” Mr. Pepples says. “It represents those who are actively promoting.”
The survey found that while Europe and the U.S. will remain critical to many, 55% of the exporters are seeking opportunities outside China’s traditional dominant export destinations. For instance, while only 8% of the companies surveyed said they had business in South America, 18% have designs on that region.
Mr. Pepples said the Chinese exporters he meets with understand that they can’t expect to compete solely on low prices and some these days try to emphasize product design, product focus and also target customer.
“There’s a tremendous identity crisis right now,” he said. “OK, it’s not price. What is it?”