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MAINLAND EXPORTS will continue to grow, according to an industry survey which also found that rising costs were threatening to squeeze profit margins.

Global Sources' China Supplier Survey of more than 1,100 companies showed that 99 per cent of exporters, ranging from the dinnerware industry to sleepwear and appliances, were optimistic.

Nearly a third of respondents expected sales growth of more than 20 per cent, while a further

27 per cent expected increases of between 10 and 20 per cent.

Most respondents expected the growth to come from shipments to the European Union or the United States.

Exporters in many industries said they were confident about future prospects because their overseas sales had been growing steadily for the past two years.

Some also said the growth was driven by new trends.

Christmas tree and lighting exporters said their growth would come from the increasing popularity of energy-saving LED products in the US and the EU.

More than 90 per cent of the companies said they would increase capacity to meet this expected growth.

Most exporters said increased sales would come with higher prices. Only 5 per cent of respondents said their export price would decrease in the coming year, while 63 per cent said it would increase.

This would be mainly driven by higher manufacturing and raw material costs. The price of PVC increased to $1,200 per tonne last year from $620 per tonne in 2004.

The China Iron and Steel Industry Association estimates that China will consume 310 million tonnes of steel by 2010.

For many exporters, however, price increases will not be enough to offset higher costs, resulting in a contraction in profit margins.

Of the exporters who said they would increase prices, nearly half said the increase would be no more than 5 per cent.

In the sleepwear industry, where there are many competitors and few barriers to entry, no exporter expected to increase prices by more than 10 per cent.

Some companies said they were able to survive and thrive in this climate because they could differentiate their products through improved quality and value-added features.

But for most exporters, particularly those offering low-end to mid-range products, this was out of the question.

They also had little incentive to innovate or invest in research and development because of the problem of illicit design copying.

To combat the problem, some suppliers are obtaining patents for their products and speeding up the design cycle.

Improving efficiency and capability are also major thrusts for exporters.

Most dinnerware companies said they would expand their product range by focusing on related items such as ceramic bathroom sets, vases and figurines.

Living room furniture makers said they would provide more training to employees and hire professional designers from Europe to help train and work with a company's designers.



China exporters predict rising sales