Appliance sellers to be hit by yuan appreciation, raw material costs

GUANGZHOU - The export prices of China-made electrical appliances will see an increase this year because of soaring raw material costs and strong renminbi, which may result in a decline in export volumes of those products.

Hong Shibin, vice-president of China Household Electrical Appliances Marketing Committee, said the increase in raw material costs has become one of the most important factors that affect manufacturers' profits both at home and abroad.

According to Hong, the price of copper has increased 2.6 times this year. Plastics and rubber also registered an annual increase of over 50 percent on average over the past three years.

"The price hike is inevitable, as prices of raw materials including copper and refrigerant have increased to a large extent this year," Wang Yulong, general manager of the air-conditioning division of Aux Group Co Ltd, said.

The company said the price of Aux air conditioners is likely to go up by 10 percent this year.

The Ningbo-based company has recently entered into a cooperative agreement with Israel's Electra Air Conditioning Co to enter the Israeli market. Aux is set to export 200,000 air conditioners this year.

"Renminbi appreciation is another big challenge for our export business, which is settled in dollars at present," said Li Jie, manager of market department at the International Business Division of Konka Group Co Ltd, one of China's biggest TV manufacturers.

A sales manager of Haier Group, China's largest home appliances maker, who declined to be named, also said the export price of the company's products will rise by 10 percent this year.

"We plan to strengthen cooperation with distributors with a big market share abroad in the future," he told China Daily at the ongoing Canton Fair, China's largest trade exhibition.

Lu Zhengwei, chief economist with Industrial Bank Co, said the rapid appreciation of renminbi will threaten trading companies' survival.

Li said that to boost the export business in such a complex market environment, Konka prefers to diversify its products to meet specialized demands of customers rather than focus on price cuts.

He said the most popular category of Konka TVs in foreign markets is priced 30 percent higher than a typical one. A typical 40-inch Konka TV set is priced at over $500 abroad.

Mike Lamberton, a US buyer at the Canton Fair, said he plans to find a long-term Chinese partner at the fair and will place an order to purchase 400 to 500 TVs to meet the demand from the US medium-level market.

China Daily

(China Daily 04/20/2011 page13)