The financial tsunami has hit the world economy hard and China suppliers have taken a battering. Faced with this once-in-a-century global economic turmoil, many Chinese suppliers have been asking the same questions: how can they steady themselves in this tough period and turn crisis into opportunity? Recently, some industry experts have come up with some "prescriptions". Though they may not provide an immediate cure for struggling suppliers, they have stimulated thinking on solutions to ride out difficult times.

Look for ways to grow

Global Sources COO Craig Pepples has been observing China suppliers for a long time. He believes that, since last August, when the financial crisis emerged, China's exports have been badly affected. However, this has also provided an opportunity for many China suppliers. He said: "The financial crisis is like a series of huge waves which hit the US and then Europe. Now, the consumption behavior in these countries has changed. But in Asia, especially China, the change is not that obvious yet."

Pepples gave an interesting example: microwave ovens have now become a popular item among U.S. buyers. "One of our clients told me that microwave ovens are now selling like hot cakes in the U.S.," said Pepples. He said demand for kitchen appliances during Christmas also saw a significant growth. He added: "These days, Americans are returning to the kitchen. They will make Christmas food themselves. Thus, kitchen appliances like microwave ovens are becoming more important." In addition, demand for DIY apparel has also increased because more and more people are making their own Christmas gifts. Most DIY apparel manufacturers are located in the Pearl River Region. One of these manufacturers saw the opportunity and racked up a quick fortune despite the downturn by exporting half-ready apparel to the U.S.

The financial crisis has put an end to the consumption model based on over spending. But this "thrift era" may not be a bad thing for China manufacturers. "Potato theory", put forward by economist and a member of People's Bank of China monetary policy committee, Fan Gang, has recently become a hot topic. It states that when in recession or famine, demand and the price of potatoes will rise. Fan believes that when demand and consumption weaken, luxury and high-end goods will be hardest hit, while demand for low-priced daily necessities will increase. Long Yongtu, Secretary-General of Boao Forum for Asia, also pointed out that the downturn has brought opportunities for China suppliers because when consumers in developed countries begin to live a more economical life, they will cut spending on luxury goods, in favor of the China-made products, which are mostly daily necessities.

Tap new markets

The financial crisis brought a spate of bad news to China suppliers, including declining in orders, shutting down of retailers and a shortage of cash. "It's not easy to predict how long it'll take for the US and European markets to recover. But it's hopeless if you just sit idly and wait. You have to actively look for new markets. Do not put all the eggs in one basket. This is the way to minimize risks," Pepples said: "From what we've observed in our recent trade shows, buyers from emerging markets have obviously increased." According to statistics released in November 2008 by China Customs, China's exports to the U.S. for the first nine months increased by only 11.2 percent, while exports to Brazil and India grew 90.2 percent and 43.1 percent, respectively. India has become a rising star for China and has become China's 10th largest trade partner. Bilateral trade between the two countries reached US$48.4 billion and is projected to hit US$60 billion by 2010, making it the fastest growing market among China's top 10 trade partners.

Last November, Global Sources held its first China Sourcing Fair: Electronics & Components and China Sourcing Fair: Hardware & Building Materials in Mumbai, India. Global Sources Exhibition General Manager, Tommy Wong, said telecommunication products, consumer electronics, mobile phones, security products and batteries were the most popular items at the Electronics & Components fair, while at the Hardware & Building Materials fair, buyers focused on doors, bathroom supplies, flooring materials, locks and lighting. India has undertaken numerous infrastructure projects and there will be enormous opportunities for building materials. Indian buyers were interested in some OEM China suppliers at the Fair and were looking to work with them. Wong said: "India is a highly polarized country. The middle class has very high spending power and is fascinated by fashionable, sophisticated and high-quality products. On the other hand, India is also a huge market for lower end products."

Tapping emerging markets has obvious become the priority for the China suppliers to weather the financial turmoil. However, suppliers need to thoroughly study and understand these emerging countries, including the political, economic, cultural, legal and technological aspects of these markets. Pepples suggested: "China suppliers now need to focus on their own advantages and to develop products that show these advantages." He added: "Unfortunately, faced with the difficulties many suppliers choose to close down. As a matter of fact, if you choose to strengthen promotions of your company at such difficult moment, it will be like lighting up a lamp in darkness – you'll be getting much-needed attention."

To help China suppliers enter new markets, Global Sources will increase its Private Sourcing Events to more than 100. At these events, suppliers get to meet face-to-face with international top buyers. In addition, to help suppliers break the geographical barrier with the emerging markets, Global Sources has launched the "e-sourcing" program. This new service is unique in that the entire process – from pre-screening to supplier selection – is conducted online. A renowned leading consumer electronics retailer from Russia was the first buyer to participate in the program.

Be flexible. Tomorrow may not turn out worse.

The situation may not be as bad as we think. According to a recent study of more than 300 international buyers conducted by Global Sources, 30 percent of surveyed buyers indicated they would increase China sourcing in 2009. These buyers think China suppliers still have a competitive advantage considering the total sourcing costs, which include logistics, quality control and other costs, so they still have a chance to prosper. Pepples said: "Buyers have never stopped sourcing. What has changed is their buying behavior." He believes many products might become popular amidst economic slowdown. Buyers may place smaller orders to meet short-term demand and they will be more concerned about suppliers' stability and product quality under increasingly high cost pressure. If smart suppliers are able to understand such new buyer behavior, they will still have a market.

Pepples stresses that buyers now have three major concerns in the supply market. First, the stability of the suppliers. Second, a guarantee of product quality – they're concerned that quality standards might give way to lower product costs. And third, the suppliers' ability to flexibly adapt to their new demands of wider variety, more shipments with smaller quantity. Thus, Pepples offered advice for the China suppliers. First, they should streamline operations and step up staff training. Second, have a good positioning, focusing on their competitive advantages. Third, study buyers' requirements and new market trends, so as to develop new products and move upmarket. And, fourth, for the more influential manufacturers, they can consider integration across the production chain.