BEIJING (Reuters) - Workers at an electrical products factory in eastern China received a pleasant shock when they returned to their jobs after the Chinese Lunar New Year holidays.
They expected a worryingly quiet period at the Zhejiang TTN factory in Wenzhou because orders from Western Europe, traditionally a key market, have been falling.
Instead, the workers had to scramble to adjust production lines because the factory surprisingly had secured big orders from new markets -- one from Russia and another from India.
The Wenzhou case is an example of how some Chinese exporters are expanding their horizons to emerging markets. This could prove pivotal now that sales to Europe are falling and other Western markets could have downturns.
Orders such as Zhejiang TTN's new ones -- worth more than $3 million in total -- could mean that the export sector proves more resilient than many international investors believe.
"The overall situation is not as bad as some have feared -- Europe is weak, but the market won't collapse," said Li Jian, a researcher with the Chinese Academy of International Trade and Economic Cooperation "Japan needs imports to reconstruct after the (2011) earthquake, and the U.S. economy is recovering."
Chinese exports "are expected to again report double-digit growth in 2012, so should imports," added Li, whose organisation is a think-tank feeding China's Ministry of Commerce.
It's also in line with Beijing's strategy of relying less on markets such as the European Union, the United States and Japan, to seek new business in emerging markets like India and Russia.
The strategy demands that the proportion of exports going to emerging markets rises by five percentage points between now and 2015. As China has set a 10 percent annual growth target for exports overall, it implies selling an additional $125 billion of products to these markets.
Chinese sales to emerging markets have been growing more quickly than to developed markets -- exports to India rose 23 percent in 2011, the same percentage by which sales to neighbours in the Association of Southeast Asian Nations (ASEAN) increased.
The question is whether that growth can come quickly and robustly enough to compensate for future falls in what are currently the biggest markets for Chinese goods.
In 2011, China's trade surplus narrowed from the year before, so was a net drag on economic growth. In January this year, there was a rare year-on-year fall in exports, though that was largely explained by the seasonal factor of an early Lunar New Year holiday period.
The export engine for the world's No.2 economy is likely to have hummed again in February, China's customs statistics chief said. February trade data will be released on March 10.
The government's purchasing managers' index for February, announced on Thursday, rose and showed new export orders for big firms.
CRISIS AS A CHALLENGE
Song Hong, a trade researcher with the Chinese Academy of Social Sciences, a state think-tank, said the European debt crisis is a challenge for Chinese exporters, but it's not as serious as in 2008 and 2009.
"It's a problem with one region, not the entire global market," Song said. "Chinese exports have weathered the Asian financial crisis, the weakened U.S. economy after the dot-com bubble, and they can surely manage the European problems."
Song forecast export growth of up to 15 percent in 2012, albeit a slowdown from 20.3 percent in 2011.
While much focus is put on China's exports to the EU where the debt crisis is denting demand, data suggests exposure to the most troubled peripheral euro zone economies is minimal.
Combined exports to Portugal, Ireland, Italy, Greece and Spain were only $62.3 billion in 2011, or 3.3 percent of total Chinese exports. The value of goods shipped to Germany along stood at $76.4 billion last year. Greece, in the center of the storm, bought about $4 billion -- about the same as the size of China's exports to Iraq or Cambodia.
The EU may be China's single biggest export destination, where 14.4 percent year on year growth lifted the total value of exports to $356 billion in 2011, but it still only represents 18.8 percent of all the goods shipped from mainland ports.
An estimated 200 million jobs -- a quarter of China's workforce -- are directly dependent upon the external sector, hiking the political risks of an export slowdown to a leadership hypersensitive to any hint of social instability that might threaten the one-party rule of the Communist Party.
Chinese President Hu Jintao said this week that China must implement "even more pro-employment" policies in coming years.
"It's quite rare that both exports and imports fell, as we have seen in January, and it's natural for the policymakers to get a bit more cautious," Song with CASS said.
Ye Dingsong is an exporter who has relied on sales to Europe, but his primary headache is pricing, not falling orders.
"There are orders, but the problem is that it's hard to get good prices. European buyers have become sensitive to prices, but costs are rising quickly so I have to ask for higher prices," said Ye, the owner of Dadong Shoes in Wenzhou.
His shoe factory, which at its peak employed more than 100 people, currently has only half as many after workers walked out for better wages elsewhere when Ye said he could manage only a 10 percent rise.
Shoe-making is a typical, labour-intensive, export business.
Wenzhou exported 265 million pairs of shoes to the EU last year, roughly one pair for every two EU residents, according to data from the local customs office. But total sales were just $1.6 billion, or $6.04 per pair, meaning margins are very narrow even as a starter's monthly wage can easily exceed 2,000 yuan.
Ye is one of the many exporters Beijing is trying to help through tough times with tax rebates and easier bank credit.
Others -- like Sanxiongqi shoe company boss, Ji Xiaoqin -- are simply trying to follow the money.
Ji was part of a business delegation to the United States in tandem with Chinese Vice President Xi Jinping's visit in February -- will simply follow the money.
"As there are impacts from Europe, so we just go to America to seek business opportunities," Ji said.
(Editing by Richard Borsuk)
Trending On Reuters
Top India News
Prime Minister Narendra Modi has asked for a drastic cutback of an ambitious health care plan after cost estimates came in at $18.5 billion over five years, several government sources said, delaying a promise made in his election manifesto. Full Article
Iran, powers close in on 2-3 page nuclear deal; success uncertain - officials Full Article