Business / Markets

Rising yuan, labor costs hit Pearl Delta

By Qiu Quanlin in Guangzhou (China Daily) Updated: 2014-01-15 07:19

The fluctuation of exchange rates and increased production and labor costs led to a slow increase foreign trade for small and medium-sized exporters in the Pearl River Delta last year, an industrial report revealed.

The trade value of a sample of 2,000 companies in the delta region increased only by 1.74 percent year-on-year in 2013, according to the report, which was released by online foreign-trade outsourcing services provider Shenzhen Onetouch Business Service Co on Tuesday.

"The fluctuation of exchange rates, especially the rising value of the yuan, and the increased labor and production costs posed great challenges for small and medium-sized exporters," said Xiao Feng, deputy general manager of Shenzhen Onetouch Business Service Co.

By the end of last year, the yuan gained 35.7 percent against the dollar, according to

The Chinese currency rose to a new record high against the dollar on Tuesday, strengthening 20 basis points to reach 6.093 per dollar, the strongest since July 2005, according to Xinhua News Agency.

According to the report, trade in the delta region was greatly affected in the second and third quarters last year because of the increased value of the yuan, with the trade climax reaching 99.72 and 98.53, respectively year-on-year, during the period.

The trade climax index in the delta region, one of the major processing and trade hubs in China, was below the threshold in reaching 99.79 in 2013 year-on-year, signaling a slow performance in foreign trade, the report said.

The index, which reflects some 500 sampled exporters' confidence about the trade outlook, stood at 101.71 in November, the highest since May, because of seasonal demand from the overseas market, according to the report.

"Although the index was higher in the fourth quarter because of the seasonal rebound, there wasn't a sharp increase in trade during that time," Xiao said. Xiao urged delta region exporters to specify demand in overseas markets and look for the right buyers in the future.

"Exporters should adopt a cautious approach to shipping products to traditional overseas markets in the United States and Europe, which have reported a limited demand and a lower purchasing price for Chinese products," Xiao said.

"They should pay more attention to e-commerce and outsourcing services to help gain profits," he added.

Yang Shan, general manager of Skymen Cleaning Equipment Co, said the company had reported a big profit loss last year because "the increased labor and production costs brought huge pressures".

"We hired more workers last year because of an increase in production capacity. But the increased labor and production costs have made it hard to male a profit," Yang said.

The company, which is based in Shenzhen, realized a sales increase of about 10 percent last year.

"I am worried about the year-end bonus for the workers," he said.

According to the report, a lack of financing has also become a major factor affecting small and medium-sized exporters in the delta region.

The financing pressure index in the delta region reached 102.11 in 2013, reflecting the fact exporters were facing a rising pressure in financing because of the appreciation of the yuan and the increased labor and production costs, according to the report.

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