Stay informed with free updates
Simply sign up to the Chinese trade myFT Digest — delivered directly to your inbox.
China’s manufacturers have slashed prices in response to a weakened domestic economy, offering potential relief to holiday shoppers in the West.
The slowdown in China’s economy and its heavily-indebted property sector has led to a decrease in commodity prices and reduced input costs.
In addition, the depreciation of the renminbi against the US dollar has allowed Chinese producers to regain some of the cost advantages they lost to cheaper locations over the past decade.
According to Even Pay, an analyst at Trivium China, “For Christmas shoppers in Europe and North America, I’d say broadly the supply picture coming out of China this year is vastly better than it has been for the past few years.”
This improved supply picture is due to falling shipping costs, the loosening of COVID-19 controls, and overcapacity in China’s metals and materials sector.
Frederic Neumann, chief Asia economist at HSBC, states, “We’re seeing a lot of deflationary pressures [building] in the goods market. And that’s fantastic for western consumers hoping to buy.”
Neumann explains that falling input costs are spreading from the property sector to related industries such as home appliances and furniture.
Prices of commodities, particularly steel, have declined due to reduced activity in the construction sector. This has affected manufacturers that rely heavily on metal.
Chinese manufacturers typically produce the majority of their Christmas orders between May and October to ensure timely delivery for the holiday season.
The producer price index, which measures the change in the price of goods sold by manufacturers, has consistently fallen for the past 11 months as of August.
Factory output prices also declined for most months between May 2022 and July this year, according to official PMIs.
The increasing costs of living in the US and Europe have impacted demand for Chinese goods. As a result, some factories have lowered prices or sought new markets in Asia.
Jenny Tse, marketing manager at Wega Hong Kong, states, “Many factories want to survive, so they make the [price] lower and lower in order to get more orders from overseas.”
Jason Wong, associate director of ecommerce at Janco, estimates that Chinese producers have lowered prices by about 5-7% this year to attract brands seeking to “de-risk” supply chains by sourcing products from other countries.
Anny Cheung, senior director at Wah Lung Toys, mentions that falling labor and raw material costs have allowed the company to reduce prices by about 2% this year.
She also notes that the pressure to shift supply chains to Southeast Asia has increased the risk of losing customers.
China’s exports have slowed down this year, contracting 14.5% in July and another 8.8% in August.
The wider economy in China has also faced challenges, with quarter-on-quarter growth of only 0.8% in the three months to June.
Michael Lu, president of Brothersbox, a gift box producer, reports a 20% decline in revenue from pre-Christmas orders compared to last year.
Additional reporting by Andy Lin and Greg McMillan in Hong Kong
Denial of responsibility! Vigour Times is an automatic aggregator of Global media. In each content, the hyperlink to the primary source is specified. All trademarks belong to their rightful owners, and all materials to their authors. For any complaint, please reach us at – [email protected]. We will take necessary action within 24 hours.
