The China Export Survey - June 2010

Our survey respondents reported strong export sales in June, but wage pressures, rising input costs, and anticipated RMB appreciation have slightly dampened their future outlook, especially considering that many exporters are already operating at low profit margins.

Exports have rebounded strongly since the beginning of the year, showing three consecutive months of m-o-m growth from March to May. Expectations are that June numbers will show continued strong export growth. However, while the headline situation appears positive, Chinese export manufacturers face a number of uncertainties. Labor unrest has hit the headlines over the past few months, prompting a number of prominent export manufacturers to increase wages, while so far this year a dozen or so local governments have raised the minimum wage. Raw material costs have also increased since the beginning of the year, placing greater pressure on margins.

In addition, the announcement by China’s central bank on June 19 that it would increase the flexibility of the RMB and re-peg it to a basket of currencies, thus effectively ending the US dollar-renminbi peg, is likely to place a strain on exporters, as will the decision to remove export tax rebates on 406 goods, which comes into effect next week.

In order to gauge the outlook for exports on the ground, and to assess exporters’ sentiments and business conditions, we spoke to 100 exporters located in 12 provinces across the country between June 28 and July 5. Respondents either already knew their final export sales figures for June or could reliably project them. The manufacturers we spoke to mostly export to Europe, the United States, Southeast Asia and Japan.