How are Chinese manufacturers coping with a slow post-COVID recovery amid weak external demand?
Authorities have been going all out to give China's economy a boost, as the country tries to put the COVID-19 pandemic behind it.
Tenglong Automobile expects overseas orders to increase by up to three times this year, as compared to 2022. (PHOTO: OLIVIA SIONG)
XIANGYANG, Hubei: China had hoped for a quick economic recovery after authorities relaxed strict zero-COVID measures and reopened its borders six months ago.
However, the results have been dampened by weak external demand.
While China’s exports saw positive annual growth in March and April, economists warned this does not paint the full picture. The comparison is from a low base, when Shanghai was in lockdown last year.
PUTTING THE PANDEMIC BEHIND
This comes as companies sought to diversify their supply chains away from China, when there had been no end to the country’s zero-COVID policy in sight. Trade tensions with the United States have also raised concerns among businesses.
Online logistics platform Container xChange founder Christian Roeloffs has observed a significant number of excess containers at China’s ports.
Mr Roeloffs said price is not the only factor in his business decisions.
“If I deal with an export country, where I can't rely on politics to create a climate or an environment for reliability, but the politics that creates a climate of sort of severe restrictions of ongoing production, then I'm more inclined to move to more reliable alternatives,” he said.
Observers pointed to other challenges that lie ahead, as the world's second-largest economy tries to put the COVID-19 pandemic behind it.
WEAK DEMAND FOR GOODS
Month-on-month export growth figures are also slowing down.
According to one forecast by ING Bank, no growth is expected in exports for this year.
This is amid weak demand for goods, as the US and Europe battle high inflation and face recession risks.
“This is not because the Chinese domestic economy hasn't picked up, it is almost the opposite,” said Ms Iris Pang, chief economist for Greater China at ING.
“It is the external market that is slowing and that will have some impact on the domestic economy.”
While the Chinese authorities are hoping to increase domestic spending, observers said the recent contraction in imports shows this may not be happening as quickly as hoped for, suggesting a bumpy road ahead in the country’s post-pandemic recovery.
"It is a strange year. It should be a recovery year for China, but at the same time, it meets the challenges of a very weak external demand and therefore it has to sort of seek new opportunities and ASEAN is right next to China and it is a good opportunity," added Ms Pang.
MANUFACTURERS ADAPTING TO NEW REALITY
Amid the gloomy outlook, companies are heading overseas once again to grow their business.
In Hubei province, once the epicentre of China’s COVID-19 outbreak, vehicle manufacturer Tenglong Automobile is hoping to make up for lost time after two years of dampened overseas sales.
Speaking to CNA in Xiangyang city, Tenglong Automobile vice president Zhou Shengming said: “It was inconvenient for the sales staff to go overseas because they are subject to all kinds of restrictions when they head out and come back.”
But business has since improved after China scrapped travel restrictions and reopened its borders about six months ago.
The company has seen more potential clients visiting from abroad. It has also set up a branch in Beijing to handle the export of its products.
“Some time ago, the Xiangyang government also organised a delegation of Xiangyang enterprises to visit Russia to expand their markets,” said Mr Zhou.
“Our chairman and general manager also personally brought teams to Southeast Asia for visits and to meet clients.”
Other manufacturers are also upbeat about the situation.
Mr Xiao Xuming, general manager of GEMAC Engineering Machinery, said: “The market proportion of our business is mainly domestic at present.
“But we can say that especially in the last two years, the growth of our overseas business has been relatively fast because of China’s strategies to go abroad, and companies have benefited.”
