China factories shrug off May export fall on nascent orders
DONGGUAN, June 11 (Reuters) - China's weaker than expected May trade numbers were being stomached by industrialists in the export hub of the Pearl River Delta, who are seeing an uptick in orders but don't see any lasting recovery till next year.
In China's manufacturing heartlands of the Pearl River Delta, the financial crisis has devastated thousands of export-oriented factories unable to cope with the twin blows of plunging Western orders and a trend of rising labour and production costs.
May's trade numbers were weaker than expected, with exports falling 26.4 percent from May 2008, while imports fell 25.2 percent, the seventh month in a row they have fallen. [ID:nSP480755]
This came despite a smaller than expected fall in May's PMI data to 53.1, its third straight month above the watershed of 50. A reading above 50 indicates expansion while a figure below indicates contraction.
The lean times were evident at the Silver Bright Footwear Factory in Dongguan's gritty Tangxia town, where several of its 100-metre long production lines remained idle.
But a stream of pink baby shoes for U.S. brand NEXT and flashy urban-fashion trainers for Japan's BAPE were making their way down other factory belts as workers stitched and glued shoes in steadily growing numbers given a mild rise in Western demand.
Michael Liu, a vice president, said while production fell around 50 percent to one million pairs of shoes last year, he expects orders to rise to 1.2 million pairs again this year.
"I expect things to recover in the first quarter of 2010," said Liu as he patrolled the factory floor.
Una Tang, the owner of Silver Bright and several other shoe firms, said while the crisis had burnt the labour-intensive, low-margin sector including heavyweights like Yue Yuen (0551.HK) and Pegasus International, her firm was focusing more on higher quality shoes for luxury brands like DKNY, BAPE and NEXT to chase higher margins.
While the export sector remains fragile, positive signs of recovery in China's economy have emerged including investment which surged 32.9 percent in May on the back of government pump-priming and a recovery in the property sector.
"We tend to believe we've already seen the worst, but recovery will be slow and gradual," said Clement Chen, the head of the Federation of Hong Kong Industries which represents tens of thousands of Hong Kong-owned factories in the Delta.
SHRINKING LABOUR MARKET
While he didn't expect another big wave of migrant worker layoffs from the crisis -- estimated at 23 million across China -- he said many firms were now trying to reduce their dependency on labour-intensive production when wages start rising again.
"Many of the factories are looking into the upgrading of their production. In the long term they believe that hiring fewer workers and putting in automated machinery, higher production machinery, will be basically their strategy," Chen added. Continued...
