GUANGZHOU: Manufacturers in China facing trade barriers are deploying an array of moves to try to keep foreign customers - giving discounts, tapping tax breaks, trimming workforces and, occasionally, shifting production overseas to skirt tariffs.
Tit-for-tat tariffs from the China-United States trade war have been costly for many. Adding to the strain on Chinese manufacturers have been European Union duties on Chinese products ranging from electric bikes to solar panels.
March brought some encouraging news for manufacturers. Industrial output rose at its fastest rate since mid-2014 and exports rebounded more than expected, while first-quarter growth was better than expected.
Still, some manufacturers who depend on U.S. sales are struggling. At the Canton Fair in southern China this past week, they put on a brave face, but feared they will need to take more measures to survive if Beijing and Washington fail to seal a trade deal.
Botou Golden Integrity Roll Forming Machine Co lost some US customers when tariffs pushed up prices for its machines making light steel girders and bars for building frames, according to Hope Ha, a saleswoman.
It now offers an 8% discount as a sweetener.
“We have to give discounts because they pay high tariffs,” said Ha.
Ball bearing maker Cixi Fushi Machinery Co gave long-term customers a 3%-5% discount, according to representative Jane Wang.
But that was not enough, so the company suspended a product line generating US$30,000 monthly revenue, she said.
“We will wait for the agreement and then we will see again,” she said. Now, the focus is on its main market, the Middle East.
Some have been able to pass along increased costs.
California-based ACOPower has increased prices about 10-15% on some of its made-in-China, solar-powered refrigerators, said founder Jeffrey Tang. “We have no choice,” he said. “We must increase the price.”
Tang says his portable fridges cannot be made affordably in other countries. But if there’s no trade agreement, and tariffs rise, the equation could change.
“Maybe I’ll just ship all the components to Vietnam to do the assembly.”
Aufine Tyre rented and filled a warehouse last year in California in anticipation of anti-dumping duties, which were later imposed. In another move to circumvent tariffs, it will soon open a plant in Thailand to make tires.
Jane Liu, a sales manager, said Aufine plans to send 50 containers a month from Thailand, with 220-240 tires in each, and later expand.
Some companies at the fair cheered Beijing’s move to trim China’s value-added tax to 13% from 16% at the start of April, and its pledge of tax rebates for exports.
“Things like this give us some protection or else we would suffer losses,” said Wills Yuan, a salesman at Ningbo Yourlite Import & Export Co in Shenzhen, which produces LED lights.
Shenzhen Smarteye Digital Electronics Co, a maker of surveillance cameras, which are not on the US tariff list, was able to drop prices because of the tax break, according to sales manager Simple Yu.
“We save a lot on costs, so we can sell at a low price,” he said. — Reuters