China's top trade fair subdued amid econ turmoil

By James Pomfret

GUANGZHOU, China (Reuters) - Chinese exporters at the country's top trade fair say orders from European and U.S. buyers are down sharply as the nation's export sector reels from the global financial crisis and tighter lines of trade credit.

Even before the crisis, rising production and labor costs in China, the appreciating yuan currency, a drying up of available credit from Chinese banks and lower export tax rebates had already forced scores of factory closures in China's manufacturing heartland of the Pearl River Delta.

While China posted a record trade surplus in September, it was a different story at the China Import and Export Fair, otherwise known as the Canton Fair, which is a barometer of Chinese foreign trade.

"Everyone has been stopped in their tracks just because of all the uncertainty," said Darrell Helms, the CEO of Fleetwood, a Pennsylvania-based retail branding and import sourcing firm.

"We're keeping inventories very tight and very lean."

In the massive steel and glass complex of cavernous halls lined with row after row of the 22,000 mostly Chinese firms displaying everything from hair dryers to satellite dishes, the number of overseas buyers, particularly those from Europe and the United States, was thinner than in the past.

The Southern Metropolis Daily, a Guangzhou newspaper, reported that for every four exhibitors at the start of the fair, there was only one registered buyer. Hotel bookings had halved from the year before, it said.

Tightened credit was making it tough for small businesses to ink orders, and that was bleeding down the supply chain.

Huang Jingping, a sales manager for the Shanghai-based Sassin Group, which specializes in high-voltage electrics, said European and United States orders were down 30 percent this year.

"The financial crisis is affecting everything. Demand is down, investment is down, orders are down," said Huang, whose firm employs 6,000 employees.

ADAPTING TO LEAN TIMES

In the hangar-sized home and consumer appliances wing of the Canton Fair, Harry Lee, a manager for Sunmile, a Guangzhou-based exporter, sat idle about his gleaming displayed wares --- meat mincers, blenders and kettles.

"It's going to be a very long winter," he said. "A lot of factories can't get the necessary cash-flow. Many clients have stayed away. We don't have any great hopes of keeping up business levels for the next two quarters."

While customers may be staying away, Lee said the rising fear of defaults was also hurting his willingness to accept orders from buyers unable to provide solid lines of credit.

"The environment is very complicated now. How to receive payment is a problem because if it doesn't come through, it could affect the survival of a factory. Many factories are having problems with payment, as you don't know when credit might be frozen," said Lee.