Rising China prices boost India, Vietnam sourcing: Global Sources survey
More than 50 percent of buyers intend to increase sourcing from India and Vietnam
Survey also reveals yuan trade settlement is gaining acceptance
HONG KONG, Jan. 24, 2011 — A majority of buyers report paying higher prices for products sourced in China, and China's exporters are becoming less competitive with other low-cost countries, particularly in the market of low-end products. These results were highlighted in the latest survey of 385 buyers by Global Sources (NASDAQ: GSOL) (http://www.globalsources.com).
Sixty-eight percent of survey respondents said the yuan's appreciation has affected their China sourcing strategy, with 54 percent indicating higher export prices as a result.
One-third of buyers are expecting the yuan to strengthen further to 6.5 against the U.S. dollar in the next six months, with 29 percent anticipating 6.43.
To deal with the rising China currency, 54 percent of respondents will boost their imports from other countries. Of these, 57 percent pointed to India as their main sourcing alternative. Nonetheless, buyers will still rely on China for orders that have exacting specifications or tight delivery schedules.
"Given the changing price point of China products, China exporters must work harder to market themselves and justify their higher prices in terms of service, product quality or production volume," said Craig Pepples, Global Sources' President of Corporate Affairs.
In addition, buyers will take other measures to cope with the yuan's appreciation and rising China export prices:
Thirty-one percent of buyers said they will increase procurement from Vietnam. More than half of these respondents are U.S. and EU-based buyers, with 19 percent from the Middle East. Many of these buyers source mainly consumer products such as hardware and fashion accessories, while some from the U. S. and Canada would purchase personal electronics.
China's apparel exporters are already seeing the effects of the sourcing shift, as Vietnam-made garments are 30 percent cheaper. China's exports of basic apparel, in particular, have been hit hard.
Thirty percent of respondents said they plan to increase sourcing from Thailand. Of these, buyers from the U. S. and the EU each accounted for 24 percent, followed closely by those from the Middle East at 22 percent.Yuan trade settlement gains wider acceptance
The fluctuating value of the yuan against the U.S. dollar has made it difficult for most China exporters to quote a fixed export price. Settling overseas transactions in the yuan instead of the U.S. dollar is being floated as a possible solution to supplier's pricing problems, but the uptake has been slow.
Only 17 percent of respondents said they are using the yuan in settling orders with their China suppliers. But almost 39 percent indicated their willingness to use the China currency in future transactions.
The main factor preventing widespread adoption of the yuan in overseas trade is the limited availability of the currency in international markets. Forty-eight percent of buyers said the yuan is not available or widely circulated in their home countries.
Global Sources interviewed 385 buyers of various China products, including electronics, home products, gifts and premiums, garments and textiles, and hardware, in December 2010. These buyers are based in China's top export markets, mainly the U. S. and the EU,with additional respondents from the Middle East, Central and South America, and Asia.
The complete survey can be downloaded for free at