Cost of Chinese products on the rise

By Matthew Henry

HONG KONG: Once considered fertile ground for cost-effective manufacturing ventures, tougher times are descending on Chinese consumer electronics factories, according to sources at this week’s Hong Kong buying fair.

With the exception of LCD and mp3 players, which are in hot demand at present, products on sale to trade buyers at the show were significantly dearer than in the past.

“Almost everything was more expensive, I would say 15 to 30 per cent more so than last year,” Electronics Australasia managing director, Tony Pack, who is attending the buying fair, told Current.com.au.

According to Pack, retailers will need to get used to price increases, rather than decreases, this year.

“The factories are telling us the cost of materials has gone up and exchange rate losses have hit hard in the last six months. This is the first year we’ve seen factories try to lock away deals in RMB currency instead of US dollars, because they want the insurance against changes in the exchange rate,” he said.

The Chinese government last year reduced the export rebate and forced an official wage increase, leading to tougher times for Chinese manufacturers.

Many of China’s factories are also now closing their doors or moving out.

At the Hong Kong fair, Pack observed an increased willingness among factory operators to cut deals and do business at any opportunity.

“At the last show in October, we noticed that people suddenly didn’t have much time for the Australian buyers because the US market was going so well, and they were focusing on the big markets,” he said.

“But when I first started attending these shows, it was the opposite and everyone thought your business was very important. It’s interesting to see now that it has come full circle, and the factories are hungry for business again.

"It’s obvious that everyone is more enthusiastic to meet you."

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