Food Commerce Net 1:27:00 p.m. October 25, 2008
Substantially Reduced Growth of China’s Air Compressor Exports in the First Seven Months of the Year
As the air pressure generator that turns mechanical energies of the motor into pneumatic energies of gases, air compressors are extensively used in various aspects of production and life. According to Customs statistics, China exported 30.97 million units of air compressors in a value of USD 550 million in the first seven months of the year, registering a growth of 3.3% and 19.5% respectively compared with those of the same period last year (the same below) even if the growth rates are 20.9 and 14.7 percentage points down. In July alone, China exported 4.401 million units of air compressors in a value of USD 85 million, registering a growth of 10.7% and 21.4% respectively. The exports have the following main characteristics:
I. General trade plays a major role and the growth speed decreases obviously. In the first seven months of the year, China exported 16.9 million units of air compressors through general trade, registering a growth of 7.1% that is 40.9 percentage points down and accounting for 54.6% of China's total exports of air compressors. China exported 12.22 million units of air compressors through processing trade, registering a growth of 1.5% and accounting for 39.5%.
II. Foreign-funded enterprises account for more than 50% of China's total air compressor exports. In the first seven months of the year, foreign-funded enterprises exported 16.57 million units of air compressors, registering a growth of 8.6% and accounting for 53.5% of China’s total exports of air compressors. Private enterprises exported 7.991 million units of air compressors, registering a growth of 15.4% and accounting for 25.8% of China’s total exports.
III. The main destination markets include EU, US and Hong Kong and exports to the EU and US have decreased. In the first seven months of the year, China exported 86.29 and 80.66 million units of air compressors to the US and EU respectively, registering a drop of 4.9% and 1.4% respectively. China exported 3.775 million units to Hong Kong, registering a growth of 6.2%. The exports to the foregoing three markets account for 66.1% of China’s total exports of air compressors.
IV. Guangdong, Zhejiang and Fujian account for more than 80% of total exports of air compressors. In the first seven months of the year, the foregoing three provinces exported 15.39, 5.312 and 4.459 million units respectively, registering a growth of 2.9%, 7.5% and 1.9% respectively. The three provinces account for 81.2% of total exports of air compressors.
China’s air compressor exports are facing unprecedented difficulties and challenges today. The main reasons for the substantial fall of export growth this year include:
I. EU imposes an anti-dumping tax to restrict imports of air compressors from China. According to the appeal by Italian air compressor manufacturers, the EU Committee decided in December 2006 to start an anti-dumping investigation on light-duty air compressors that were originally produced in China. Despite the active efforts made by Chinese enterprises to answer the appeal, the EU Committee still ruled against China on excuse that China was not a market-oriented economy. The EU Committee decided to impose an anti-dumping tax as high as 77.6% over air compressors produced in China from March 21, 2008 for a period of two years. Considering that the EU is the biggest export market of Chinese air compressors, China’s exports of air compressors to the EU decreased by 12.9% from April to July, as against the 18.8% growth of air compressor exports to the EU in the first quarter of the year.
II. US subprime loan crisis reduces the needs for China’s air compressors. As the second largest export market of Chinese air compressors, the US demands have been reduced due to the breakout of the subprime loan crisis, with China’s air compressor export to the US down by 4.9% in the first seven months of the year. In addition, bad loans that are caused due to bankruptcy of US importers also have to be addressed by Chinese exporters of air compressors. Powermate Corporation applied to the US court for bankruptcy on March 17 due to lack of working capitals, which directly led to the loss of USD 10.55 million account receivables of Chinese exporters.
III. Rise of production costs and appreciation of Chinese Yuan reduce profitability. The costs of air compressors have kept rising due to rises in raw material prices and labor costs and appreciation of Yuan. However, the rise of export prices has to take place later. For that reason, the profitability of air compressor industry that is already full of fierce competitions is further reduced. It is known that some Chinese manufacturers of air compressors have seen an approximate 20% increase in production costs since February this year.
Proposals: firstly, guide enterprises to increase R&D investments, increase the technology intensity and quality of products and thus increase their international competitiveness; secondly, encourage enterprises to “go overseas” and invest to set up factories abroad in order to avoid trade barriers, actively explore Latin America, Middle East, Africa and other emerging markets and find new sources of demands for air compressor exports; thirdly, promote enterprises to actively engage in export credit insurances in order to avoid losses of foreign exchanges and reduce operating risks; fourthly, establish the trade society to guide and supervise the exports in order to guarantee benign and orderly competition.
