China’s Exports—So Far, So Good
Despite a summer of recalls and a flood of negative publicity alleging shoddy goods made in China, China’s exports grew by 27 percent in the first nine months of 2007, as compared to the same period last year. While specific data is not yet available for the nine-month period, China’s food and agricultural exports to the United States also increased by 27 percent, and exports of toys from China increased by 18 percent, through August.
Not all of the news was positive, however. Exports of certain food products, such as shrimp and eel, to both Japan and the United States fell sharply. Also, exports of toys to Germany fell by 42 percent during the first eight months of the year. While quality concerns no doubt had an impact, currency concerns are also playing a role in exports to Europe. Since China revalued the Renminbi and allowed the currency to float within a narrow range in July, 2005, the Yuan has appreciated by 10 percent against the U.S. dollar, but has depreciated by five percent against the Euro, causing increased concerns with China’s European trading partners.
Anecdotally, the “Made In China” crisis appears to be having a long-term, positive impact on China’s attitude towards the importance of quality. In addition to the attention it has received at the highest levels of the Chinese government, the New York Times cited a recent survey which indicated that over 60 percent of the Chinese companies surveyed said that they were investing heavily in new quality control systems.
Although the news on China’s exports so far seems to indicate that the country has survived the recent crisis with little impact, it still may be too early to tell for certain. The recalls and much of the negative publicity was largely a third-quarter event and would not have impacted orders that were already placed or on the water. Export results for the fourth quarter will provide a more accurate indication of how the aftermath of the crisis will play out.
