Commodities

Chinese Factories Hurt by Revamped Environmental Crackdown

exporters and manufacturers are saying they're hurt by the ramped up environmental crackdown

Chinese exporters and manufacturers are struggling to cope up with the ramped up environmental crackdown initiated by the government.

Exporters from China at the Asian giant’s largest trade fair, the Canton Fair, are sanguine about global demand, although the country’s environmental crackdown on pollution is pushing up costs and product prices, denting smaller factories and foreign buyers.

Around 25,000 manufacturers are at the Canton Fair and are exhibiting various products like industrial engines. Maintaining an optimistic outlook, China has beaten anticipation of an economic slowdown this year. Growths in both import and export in September indicated a steady and tremendous factory activity in the country.

Among the 102 exporters who attended the Guangzhou-based trade fair, around 77 percent said that they expect a rise in orders in 2018. During the previous held in April, only 70 percent stated a similar expectation. The exporters are comprised of mostly small-to-medium-sized manufacturers from China.

However, manufacturers are also complaining about currency fluctuations. Additionally, the country’s ramped up efforts on its anti-pollution campaign is forcing firms to scramble in investing on new facilities and equipment to meet the revamped emissions standards.

“The environmental regulations are hitting everyone. I’d say thirty percent of factories are affected,” said Masda director Lynn Chen. Masda is a Pearl River Delta manufacturer of antennas, coming with around 20 million yuan, or $3 million, in sales yearly.

Larger companies are coping up better with the upgraded standards, but smaller companies have less wiggle room and are close to being out of business. Chen noted that the cost of sourcing necessary components for antennas had climbed up to 20 percent.

Across the commodities space, price rallies have become faster in the preceding months as factories prepare for the most meticulous measures taken to crush the smog problem, which has been bugging cities in the world’s second largest economy for quite length of time. More than 20 cities have been required to slash the output of heavy industry for four months starting on the 15th of next month.

Sentiments

“The changes are good, but they’re being pushed through too fast,” said David Li of Guangzhou Light Holdings, which manufactures speakers. He said that plants with metal plating, dyeing, or spray painting processes have been terribly affected. Thus, production costs rose by 5 to percent.

“It’s really scary. How could the price change so much?” said Maxwell Akabuogo, who has decided to lessen the containers he sends to Nigeria from 12 down to only 3. This is due to the surge in the prices of lead batteries, which are his primary product. Over the past 4 months, the prices have risen 30 percent.

“I’m starting to buy from South Korea now. It’s more reliable and the price is steady,” said Akabuogo.

“China’s long-term policies on the environment are good but there is a short-term impact…the bad (polluting) companies have died. The buyers will have to get used to those prices. They won’t get back to the previous levels,” said Venee Wen in an interview by a news agency. Wen is a regional sales manager for Guangzhou Tiger Head Battery Group.

Currency Sentiments

The yuan’s 5 percent surge against the dollar had “significantly” hurt the businesses of around 44 percent of the firms that participated in a survey. Meanwhile, 50 percent of them said that it is only “slightly” hurting them.

A further appreciation by the yuan is seen by around 43 percent.

There have also been fewer concerns about a trade war between the Asian giant and the United States under President Donald Trump. Around 30 percent said that there is an existing possibility of a trade war, down from 40 percent last April.

“Trump is a businessman. He’ll make some noise, but not fight,” said Liu Linxia, a LED TV maker.

Meanwhile, many seemed to ignore the looming tension in North Korea.

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