China's exporters may see fewer orders for low-end products in the months ahead. More than half of respondents to a Global Sources survey of buyers of China products say they will be increasing their sourcing from other countries. This comes in response to rising export prices from China, driven by escalating costs and expected strengthening of the yuan.
More than two-thirds of respondents said the yuan's appreciation had an impact on their China sourcing strategies, largely in response to higher prices.
The survey of 385 buyers, conducted in December 2010, shows India as the clear favorite to benefit from the shift in sourcing strategy. Around 57 percent of buyers that will increase procurement in other countries are planning to boost imports from India.
Of these, more than half are based in the US and the EU, with 20 percent from Central and South America. These buyers are engaged in a wide range of industries, including auto parts and accessories, biometric systems and security products.
Other favored sourcing alternatives include Vietnam, Thailand and Malaysia.
India, Vietnam top sourcing alternatives
Sourcing from India certainly has its advantages. Export prices of some products such as stainless steel cookware are a lot lower than in China, simply because of inexpensive operating costs.
Chris Devonshire-Ellis, principal and founding partner of Dezan Shira & Associates, a corporate services provider to multinational companies in Asia, compared the basic expenses of a typical factory in Dongguan, Guangdong province, with those of a similar plant in Chennai, southeast India. He found spending on salaries, benefits and rent in Dongguan is seven times more expensive than in Chennai.
India has strong software, diamond and gold jewelry processing, and wood and metal crafts industries as well. Exports from the country's software industry have been growing 50 percent annually. In the jewelry sector, the majority of output is worked on and fashioned by hand, which results in intricate detailing that cannot be replicated via machine.
But importing from India also has its drawbacks. Most export manufacturing industries do not have well-established ancillary sectors, stunting the supply chain. Moreover, the country still does not have a solid infrastructure in place. Blackouts, for instance, are common in India, with outages disrupting production for up to 12 hours a day.
The survey also confirms that Vietnam continues to emerge as a viable alternative to China, with 31 percent of buyers planning to increase procurement in the country. More than half of these respondents are US and EU-based buyers, with 19 percent from the Middle East. While many of these buyers source mainly consumer products such as hardware and fashion accessories, some from the US and Canada purchase personal electronics.
Read the full survey at Global Sources, a leading business-to-business media company and a primary facilitator of trade with China manufacturers and India suppliers, providing essential sourcing information to volume buyers through our e-magazines, trade shows and industry research.