Canton Fair: Chinese yuan gains currency but export orders fail to beat pre-Covid levels

Organizers said nearly 198,000 foreign buyers attended the fair, a 6.4 percent increase from the pre-pandemic fall 2019 session.

They signed export deals worth $22.3 billion, a modest 2.8 percent more than the spring session in April-May, but still almost $7 billion less than in the pre-Covid edition.

“We have collected hundreds of business cards from buyers at the fair, but there is also a lot of competition,” said a manufacturer and exporter of lighting products.

“An Italian customer visited our factory this week and, as far as I know, he will also visit dozens of other factories. To get his order, you can imagine how much competition there would be,” said the exhibitor who declined to be identified.

Chinese export growth fell for the fifth month in a row in September, but at a much slower pace as the broader economy rebounded in the third quarter.

More buyers, meanwhile, showed interest in making payments in Chinese yuan, Canton Fair exhibitors said.

“Buyers from Eastern Europe requested quotes in Chinese yuan instead of the US dollar, as did several Middle Eastern customers,” said Liang Hong, a veteran exporter who has been participating in the fair since 2003.

“Although orders from the two regions do not represent a large part of our company’s export volume, we see the trend to settle payments in yuan increasing.”

Liang also said his company was eyeing Russia’s large market potential while implementing strict controls over sanctions concerns related to Moscow’s invasion of Ukraine last year.

“There is a very high demand from the Russian market, with a population of more than 100 million people, both in terms of yuan settlement and export orders.” Liang said.

This comes as China is stepping up efforts to boost the appeal of the yuan as an alternative currency in global trade and also as a reserve currency, even though it is unlikely to defeat the dominance of the US dollar.

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Yan Wei, an agricultural machinery exporter based in the eastern province of Jiangsu, said buyers from advanced economies such as the United Kingdom are also open to settling payments in yuan.

“Russian customers arrange yuan trading with us, just like buyers from Britain,” Yan said. “They are willing to do that, and it is not difficult to buy yuan from local banks in Britain and then transfer it to us.

“This means we can avoid (losses from) fluctuations in the exchange rate of the yuan against the pound or the euro.”

Kiri Oi, an exhibitor from C&D products Group, a clothing exporter with factories in Bangladesh and Rwanda, said she still preferred the US dollar for payments as her main customers were from Europe and the US, but a growing number customers from Southeast Asia I asked for quotes in yuan.

“We are happy to see some new potential customers at the fair, and we need new orders for our new factories,” said Oi.

Geopolitical tensions, especially China’s rivalry with the United States and US-led risk reduction measures, have also cast a shadow on Chinese trade.

“The first question American importers asked was: Does your company have a factory abroad?” Jane Wang, an exhibitor who produces bags and suitcases, said.

“If you said yes, they sat down and continued to discuss the possibilities for collaboration. If you said no, they just left.

“Some European and American buyers can accept higher prices as long as we have factories abroad. Supply chain diversification is a reality. If we want to do business in the European and US markets, we have to meet their demands.”

“Vietnamese customers here are looking for parts and components to take back to Vietnam for assembly, or equipment and molds to upgrade their production lines,” said a Vietnamese buyer who planned to buy engine parts.