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Companies flinch at Canton Fair amid global crisis

(Xinhua)
Updated: 2009-04-17 20:11

An emergency notice posted by the Business Office of the Canton Fair warned firms to be on guard for an American buyer whose firm had gone bankrupt in order to avoid its debts.

That's the kind of atmosphere prevalent at this year's fair.

The fair from April 15 to May 7 has 22,104 domestic and overseas attendee companies this year, 237 less than last year.

Related readings:  Canton Fair opens with hope despite crisis  It's business as usual for all at Canton Fair  Canton Fair to focus on home turf  Hotels cut rates to attract guests during Canton fair

"We worry more amid the global crisis as the risks have risen," Huang Xiaojian, vice general manager of a Chinese home appliance maker named Hisense International Marketing Co Ltd, said on Friday.

To control the risks is the top priority of Hisense in 2009, Huang said. The company had set up a "Risk Control Committee" consisted of high level managers to evaluate the assets of each new customer company.

"We sometimes consult an insurance company to make a thorough investigation and buy export credit insurance," Huang said, adding that they saved a debt by using the insurance last year when an American customer went bankrupt.

Big companies may face risks, while small ones become more cautious.

"Everyone is wading across the stream by feeling the way, as the old Chinese saying goes. We are not bold or decisive anymore," said Chen Jianyong, manager of a Guangdong company producing Computer peripheral products.

Chen said this time the company's biggest order from the fair was $1 million, half of last year's.

"Many customers used to order here at the fair but this time many people only took samples back," he said.

"There is no longer an attitude of 'more risks, more benefits,' as the international situation has changed," said Feng Bin, general manager of Chunlan Import and Export Co. Ltd. from east China's Jiangsu Province.

The home appliance producer built a risk-control system five years ago and has had no bad debts in the past five years, Feng said.

According to the Ministry of Commerce, the bad-debt ratio of China's export was five percent in 2008, 20 times higher than the world average, and 68 percent of the companies had experienced losses from international buyers, said Zhang Hua, from Guangdong branch of the China Council for the Promotion of International Trade on Friday.

Export companies in Guangdong now faced a more severe situation, Zhang said. The export order total reached $404.1 billion last year, among which $20 billion was bad debts, he said.

The ministry and the council had warned the companies to be more cautious, however, many have little experience of risk control, Zhang said.

Many companies lost a lot in recent trading just because they were eager to do business amid the global crisis, said Chen Liancong, general manager of the Guangdong branch of China Export and Credit Insurance Corporation said on Friday.

Some companies even agreed to be paid less in advance, Chen said.

Some larger companies chose to get closer to their old customers but not explore new ones. One such was the Midea Group, a Chinese home appliance producer with headquarters in Guangdong, which began exporting in the 1980s.

"We tried to maintain the relationship with our old customers, including international chain supermarket companies Carrefour and Wal-Mart," Dong Xiaohua, director of the brand management department of Midea told Xinhua on Friday.

Positive changes had appeared in China's economy as the GDP rose 6.1 percent in the first quarter of this year according to China's National Bureau of Statistics (NBS), said Li Xiaochao, spokesman for the NBS, on Thursday, which was a better-than-expected performance.

Amid the severe export situation, many companies, including Hisense, Chunlan and Midea said they had witnessed a stable rise in export orders in the first three months.

"We had a 40 percent year-on-year rise in the first quarter, much higher than expected, which encouraged us in our planning," said Hisense vice general manager Huang Xiaojian.