China's romantic rendezvous with global trade seems to be nearing a bitter end. In the last couple of decades, the country had become the posterboy of growth and excellence in manufacturing. Today, there's fear in the voice of every Chinese exporter. The Dollar Business team paid a repeat visit to the autumn session of the mega-Canton Fair (in October-November this year) and learnt how even in China, change is the only constant. The Chinese export-manufacturing community is currently waging a brutal primary war against slowdown in business. And though it's not over for China yet, the past teaches us that the multi-trillon dollar economy is experiencing more than just harmless tremors. China is in danger – and confessions at the Canton Fair's recent edition make us believe that happy manufacturing days in China may be over sooner than expected. The dragon it seems, has started sneezing already.

Steven Philp Warner (Editor-In-Chief) & Manish K. Pandey (Editor) | December 2015 Issue| The Dollar Business

For years together, China has been playing brain games to keep its body young. Call it positive attitude gone awry or brutal honesty in display as a reaction to someone, somewhere having called its macroeconomic bluff, the economy that feeds the largest number of mouths in the world (or the favour being done the other way), is burning belly fat faster than desired.

China Isn't Responding!

Numbers have never looked this telling for China. And probably, world leaders have never believed China’s data more. From exports to its currency, from the Chinese stock markets to its unemployment rates, from sectoral growth indicators to its imports – the big, glorious and title-winning face for years together has suddenly assumed an ugly tan. It is humiliation akin to a championship team of two decades running, being knocked out of a tournament in the qualifying group stage. Some feel this is a time for China to focus on newer sectors. [What is there left anyway except services?] Others opine that it’s a time for the 9-plus trillion dollar economy to try everything to avoid deteriorating into the Japan of the 90s or worse, retrogress to the China of the 60s.

Live from Canton Fair, 118th session 2015 (Clockwise from top L): Hall 11.1 in Area B with festival products being showcased; Hall 9.2 in Area B with gifts and premiums on display; Hall 11.3 housing home decorations in Area B; gardening products displayed in Hall 4.1 in Area A

Till the very end of 2014, economists were heard reciting loud, pretty verses on how China’s surprising government control on “everything” (including both humans and robots) was the modern form of socialism-driven world economic order that will last another decade at the very least. And also how for the next many years, the world will continue to bet significantly on the chance that all x, y and z-feet containers that appear peppered on coastlines around the world hail from one of those 2000-odd Chinese ports.

Ten months later, the Chinese dragon seems to have caught cold.

Blame is being poured on everything and everyone.

Live from Canton Fair, 118th session 2015 (Clockwise from top L): Hall 11.1 in Area B with festival products being showcased; Hall 9.2 in Area B with gifts and premiums on display; Hall 11.3 housing home decorations in Area B; gardening products displayed in Hall 4.1 in Area A

The world holds China liable – its managed float-based currency, slower than desired growth in domestic consumption, overdependence on investment-and-tax holiday-based exports strategy, and ineffective recent stimulatory policy initiatives. As for China, it finds natural fault in the mindset of an otherwise wary consumer lot in a still-recovering America and troubled EU and imagines itself a victim to the world’s itch with recovery and growth cycles lasting beyond six-to-seven years. [The Chinese feel that someone, somewhere should have told them to give their assembly lines some rest and stop piling products. No one did. And that’s the world’s fault!] Trouble is – China has always been “at the doorstep” harbinger of incredible trade performance – literally a forerunner of spring in the global economic air. And one day it was bound to have the wood slamming right on its face. It was not a question of whether. Only when.

China had become such an economic sizzle that its normal was no longer really normal for the rest of the world. For instance, for US, France, Germany, Australia, and even Japan and India (the last two nations signify two ends that justify the existence of what we call the inequation of global economic growth), anywhere between 1%-6% annual GDP growth is still considered “normal to very good”. For China – that’s when you get a frightful thought like, “Doc! China is not responding!”

Canary In The Coalmine

Remember the hopelessness of 2009? That scent of dead time is quite coming back. Allow us to take you on a quick tour of time. We turn the page to a year not very long back, when the world had just started recovering from the tech bubble shock. Starting early 2002, Chinese exports to the world grew every month on a y-o-y basis for straight 80 months – that’s quite a run lasting over six-and-a-half years. Until in November 2008, the crack on the wall first showed.

Zero months of contraction in 2006 and 2007 was followed by two months of contraction in 2008...and the world knew there was a problem at hand. In 2009, out of 12 months, China’s exports shrunk in 11. That’s when world economies started behaving as though all their mass-transit systems had gone into a shutdown. Thankfully, then America was the culprit, Europe had some institutions guilty and China promised to save the world. It did in part.

Cut to the present, a 2009-like economic hurricane is brewing. From zero months of export contraction in 2010 and 2011, 2012 saw a month when exports growth fell into the negative, 2013 and 2014 saw two each, and 2015 so far has been a ride to hell!

China it seems has forgotten what stage dancing is. There was a time when all it needed to do was a “mere announcement” (often, just a whisper behind closed doors), and the world would assume the shipment signed and completed. Now, it’s much about suspicion. If exports growth in either of the two remaining months of 2015 show a negative, it will be understood that China is doing just as (un)well as it did when the world had given up to fate when the last recession began about seven years back. But then, there was China to play the savior. Who will save when China’s factories grow colder than ice?

Worse, China’s performance of 11 months of export contraction in 2009 happened when primary schools around the world had started teaching the meaning of the word “austerity”. At present, the world is looking to grow and recession isn’t really a "next thing" for now. This time, the typical trouble seems to be “China”! Times have changed. The savior child is now the trouble child. Or so the world thinks.

Then And Now

There are two ways to best find out what’s cooking in China. First, spend a few days in China. Second, speak to stakeholders in their manufacturing and export-oriented business communities.

The Dollar Business (TDB) did both. Sensing that matters were in for a change, TDB first sent its team to the Canton Fair in the autumn session of 2014, and followed it up with a repeat visit in this year’s autumn edition (118th session of the Canton Fair, October-November 2015). With close to a month’s observation and discussions in-and-around the manufacturing and export belt of China’s east coast, we can conclude in quick words that China “is both worrying and worried”.

How matters can change in a year is interesting. The same venue, the same time, almost the same security, registration and other arrangements, and yet such a visible drop in enthusiasm and visitor volume.

A year back, you almost couldn't expect to walk into a stall and start off shooting queries at the stall personnel. At 9 of 10 stalls, you were forced to wait for a couple of enquiries to be entertained before your turn arrived. This year, all it felt was "You".

Then, almost every conversation with a manufacturer ended with a question popping from the Chinese host, “Do you want to visit our factory?” This time, our team checked into almost 300 stalls – and not one asked such a question! [Actually, not even a hint or a line that sounded anywhere near it; that’s cutting corners to a miserly level.]

Then, the initial wait at the registration queue was about 30-50 minutes. This year, there was literally no queue on the opening hour of the opening day.

Then, you couldn’t make your way into or walk out of the fair each day without having to exhaust more than a few visiting cards (FYI, the Chinese don’t understand “visiting or business cards”, they ONLY collect “name cards”, just like they don’t understand “receipt” or “bill”, but only hand over a “ticket”) in return for some freebies and invitations being doled out in and around the entrance gates (starting from the very first flight of escalators at either Pazhou or Xingangdong subway stations). This year, the number of such young “card collectors” was down to one or two at some gates, and none at some.

] Live from Canton Fair, 118th session 2015: Hall 12.1 in Area B where festival products were showcased. Lack of footfalls and foreign buyers was alarmingly visible in the current session of the fair.

Then, the proportion of “aliens” (which is what the Chinese immigration authorities call “foreigners”) at the fair was significant. One can safely say that the combined count of Europeans, Americans, Indians, Australians, Africans, Middle Easterns and other Asians would have been in the range of 1 to 2 for every 10 Chinese that you could spot at the fair. This time, the whole show looked more like “China Import Fair". 

Then, to grab an occasional selfie inside one of the exhibition halls, you’d have to wait for the crowd to walk out of the background. This time, you’d be left desiring for some humans for the photograph to look real.

Dragon Spills The...

During one of our usual conversations, Janeca Liu (head of sales at booth no. 2.1 L08, occupied by Takrising Manufactory Co. Ltd.), started talking economics. A graduate from Guangdong University of Foreign Studies, Liu is well aware of the buildup to this supply-demand mismatch that her economy and the world are experiencing. Her company manufactures kitchenware and other articles of iron and steel. She is also afraid that China’s exports and cost-driven manufacturing strategy may already be in the twilight zone. “Business has been poor in the last six to ten months. Libya, USA, Eurozone have all seen a decline in demand for our products. Problems in Europe and the Arab Spring have killed business. Excess supply in our factories and the overall kitchenware and steel products industry has caused prices to fall. This year, our products are marked at 3-5% percent lower than 12 months back, despite factory wages and other input costs rising,” said she, pointing to a teflon coated set of dark red coloured induction cooking cutlery set placed handsomely on one of the top shelves of her stall. [The stall had enough room for over 20 people, but had none except two company representatives and two from TDB].

Authorities in China may claim that this is just a minor hiccup and that the world will see China come back to its best again and soon. In the second week of September this year, the country’s Finance Minister Lou Jiwei claimed that this phase is the "new normal" of slower growth of about 7% for China. That’s perhaps how he wants the Chinese to judge proceedings in a centrally-controlled economy. How the world understands this new phase is quite different. For anyone on the outside, it’s been a bad bad bad year for Chinese exports and the economy as a whole – one whose stock markets, currency and export-import figures have been at their worst, probably ever! Ten years back you couldn’t have imagined China reducing its foreign reserves to support its currency. Today, that is a reality. [And after having burnt dollar reserves to some extent, Chinese banks are now borrowing dollars in the swap market and selling them in the cash spot market in exchange for the home tender as an alternative to support the home currency without depleting its reserves. The yuan needing such desperate revival stunts in the past is unheard of.]

Worse, the country’s poor performance gets a character when you view it in the light of weaker exports. In the first six months of CY2015, the quarterly average of imports by China stood at $404.38 billion, a fall of 15.31% as compared to that recorded in the last three years. The change was negative in 44 items out of 97 chapters of ITC HS Classification. So to tell you what the world perceives a reduction in consumption and imports of manufacturing inputs by China in the past six months (like oil, tin, lead, cotton, vegetable fats, ores, copper, aluminium, rubber, zinc, plastics, machinery, auto, etc.) – China’s in trouble and we’d rather stay away.

A shot of Area A, overlooking Halls 13.2 and 12.2 at 2:14 pm CST (China Standard Time) on Oct 24, 2015 during Phase II of the Canton Fair's 118th session 2015

Less consumption means less production, and that is enough reason for importers around the world to not swarm to the Canton Fair party like they did each year. Shelly Zhang, Sales Manager at Guangzhou Yi Xin Paper Co. Ltd., has met customers from around the world in the past 12 editions of the fair, and according to her, selling paper products has never been this difficult. “For the past six years, every hour, there would be 10-12 customers at our stall. This year, the average has fallen to two to three. Demand from Spain, Germany, France and some other parts of Europe have fallen to zero. India and South Africa have been our top two customers this year.”

(Top) Proof that China still doesn't care much about usage of correct English, even during Canton fair, which a large group of foreign, English-speaking buyers are expected to attend each year. (Bottom) Health inspectors at the fair testing water and food hygiene and quality at the fair, at a restaurant outside Hall 10.3 in Area B.

Assembly Lines To Branding?

One of the rare stalls where footfalls appeared heavy, with the sales representatives being left with no time to attend to pricing queries, was that of Nice Cooker Co. Ltd. Unlike how many assume Chinese prime offerings to be, the company sells premium priced marbled cookwear, with handles imported from America. Customers from Italy, Germany and the Middle East, kept associates at the stall busy. Raymond Chen, who was referred to as “Boss” by the oldest looking sales associate at the store sat in a 10 ft by 6 ft cabin adjacent to the stall – again a rare observation at the fair. That room which had a transparent yet sound proof partition as a door, was meant for discussions with clients to give them enough privacy and respect. Only one client was allowed in at a time and we had to wait for about 30 minutes for our turn. During a quick chat with TDB, he said, “We mostly sell to American and European customers. They like our high quality and pay high prices,” says Chen. So unlike Made in China, we thought. Considering that his key clients belonged to these markets, the discussion room seemed apt. Chen’s was one of the few stalls in the entire fair that appeared like it belonged there. Reason – branding. Well designed, the store had its products very clearly highlighted. Unlike most stalls, it had about 7-8 products on display with all attempts to make the showcasing absolute world-class to suit tastes of First World buyers. It was an exception because the total cost incurred in space booking, setting up the stall and branding, seemed higher than the value of the sparsely populated products at the stall. It's the same feeling that you get when you walk into a Versace store in Dusseldorf or Champs-Elysées.

We could spot about six to seven other stalls operating on the same principle. Perhaps the Chinese, are finally learning that beyond assembly lines, the edge lies in differentiation through branding and positioning – call it perception-play.

From China, Without Love...

Whether you would have spotted the right-priced, right-quality product that you set out to order while walking into the Fair’s 118th edition is a question we can’t answer. What you wouldn’t have missed is a clear sense of xenophobia, especially if you were and would have introduced yourself as an Indian. [We didn’t try calling ourselves a Pakistani, Afghani, Thai, Vietnamese or even a Bangladeshi. The reaction may have been similar; talking strictly economics.]

Art ceramics in display at Hall 5.1Y in Area B

Jane Yáng, Stall Manager of Foshan Ceramics which sells high quality porcelain tableware told a TDB representative within 15 seconds of his stepping into her stall that, “India sells similar quality tableware at lower prices.” She indicated that an Indian buyer walking into her stall would only mean a waste of time for her and her company. The fear of the great Indian rope trick mutating into the factory trick was loudly apparent.

Liu of Takrising Manufactory Co. was kinder with her gestures and clearer with her words. “We don’t export to India anymore because our wages are a big problem. They have risen faster than in India. As such, in iron and steel-made kitchenware, India has achieved a bigger advantage in terms of pricing,” she said.

This apparent xenophobia is not just all a fear of the mind. An analysis by TDB Intelligence Unit proves that Chinese exporters have reasons to fear India. Not that India’s dependence on Made in China has fallen significantly in the recent past. [In the first two quarters of 2015, India’s imports from China by value grew by 6.19% to $14.55 billion as compared to the average in the past 12 quarters. This, at a time when India’s imports from the world fell by 17.82% to $97.25 billion during the same time intervals.]

There are reasons however.

One, at the two-digit HS Code level, there are 46 significant chapters under which India’s imports from China in the first six months of 2015 have fallen in terms of quarterly averages (value), as compared to the past three year period (CY2012-2014). The list of items that fall in this group are indicative of the fact that India’s domestic manufacturing may have picked up to the level of self-sufficiency. And if not already, there is a strong chance of that happening in future. [The list includes articles of iron or steel; ships; mineral fuels, oils, distillation products; silk; cotton; animal and vegetable fats and oils; copper and articles; aircraft, spacecraft; tools; cutlery; plaster, lime and cement; manmade filaments; lead and articles; zinc and articles; automobiles; tanning and dyeing extracts and pigments; lac, gums and resins; photographic or cinematographic goods; tin and articles; beverages and spirits; railway and other locomotives, etc.]

Two, there are 33 items (at the HS Code chapter-level), which China exported more of in the first two quarters of 2015, and India imported less of from China. To quote a couple of examples, China exported 4.21% more of articles of iron or steel (avg. of $15.13 billion per quarter) to the world in 2015 as compared to the past three years. India imported 17.19% less of it ($0.29 billion per quarter in 2015). China exported 4.55% more of tools, implements, cutlery, etc. of base metal in 2015 ($3.5 billion per quarter) while India imported 11.26% less of the category ($48.55 million). Similarly, China exported over 50% more of aircraft and spacecraft parts this year per quarter, while India’s imports from China shrunk by over 80%! China is making but India is not taking – suddenly the hue of our bilateral trade relationship seems altered.

Three, and most importantly, the big sign to believe why the Indian manufacturing revolution may have begun and Canton Fair may need to be renamed and hosted at one of India’s campuses in sime years from now. TDB has identified at least 25 products which China exported less of and India exported more of per quarter in the first half of this year. Machinery, nuclear reactors, boilers; articles of apparel, accessories; optical, photo, technical, medical, apparatus; footwear; toys, games, sports requisites; ships; other textile articles; glass and glassware; food preparations; copper and articles; clocks and watches; special woven or tufted fabric, lace, tapestry, etc.; manufactures of plaiting material, basketwork, etc.; cereal, flour, starch, milk preparations and products; nickel and articles; milling products, malt, starches, inulin, wheat gluten; arms and ammunition; and many others. Almost all of these items involve a little or large degree of engineering and manufacturing – a sign that India has started making some noise in China’s private, manufacturing fiefdom.

It wasn’t hard to sense how Chinese suppliers were looking to primarily concentrate on clients from the First World and the Middle East markets and treat buyers from India and South Asia as secondary, which wasn’t the case in earlier editions of the fair.

A shot of the central hall in Area B, an hour before closing time on October 24, 2015

Talking about India’s challenge to China – the trade problem with India and China may look similar but is different by miles. China’s exports have fallen in the recent months. India’s exports too have. But the difference is that surplus of manufactured goods and weak domestic demand is a problem for China. [China's consumer finance market is still at an early stage of development and as such domestic consumption in China isn’t easy to influence with straightforward monetary policies. The country’s high Gini coefficient is another problem to fueling domestic consumption.] For India, the Make in India campaign has just about started stirring sleepy heads in the Indian manufacturing grounds (so there’s no supply overdose yet) and domestic demand can well be influenced by monetary policy. As such, the advantage that India has is that when the world is back to the high-consumption mode at both the industrial and consumer levels – which could be four to seven years later – manufacturing activity and Make in India would be in full throttle. [Can you already smell a China 2.0?]

Odour Of Futility

China is a strange paradox of sorts. Walk along the streets of Guangzhou, hop into the subway or step into a night club, you will understand how the Chinese young and old take pride in wearing Made in China. The rounded edge of the Nike swoosh stitched into the upper lining of the shoe’s sole or Michael Kors being spelt as Micheal Kors (could you spot the difference?) on handbags, show how the Chinese enjoy every bit of their factory workers spoiling the American or other Asian parties. This was the case with almost every Chinese we observed at Haizu square – one of Guangdong province’s premier and upmarket shopping and dining areas. And it’s ironical that almost every one of these imitation brand-clad Chinese should carry the most recent iPhone model.

On the other hand, the Chinese government is not one to give up on trying to push domestic consumption even higher. At the airport, automatic taps that read Karong last October now read Ouni and Caiba, soap dispensers that read AOSP now read Rajeyn, hand dryers that bore the WEME brand had now become Modun, and TA auto-flush systems had become Haotai! Everything had changed, except the beagles that still went happily about sniffing. [We did wonder if the beagle brigade was the next gen of the one we saw last year.]

After so much of consumption of Made in China by the government and individuals, the Chinese problem remains that their domestic consumption is still weak! Unbelievable!!! Some things are tough to digest, just like the Chinese script. Imagine, if after so much of Chinese made goods being consumed everywhere you go in China, how much of manufacturing surplus must the Chinese be hiding in their backyards?

A Problem Of Plenty

It is the surplus of manufactured goods that has made China’s side of the bargain weaker. And you can sense this even while at the fair. Prices that Chinese exporters quote across many product categories have today fallen despite inflation on the input side. Sellers of kitchenware, articles of iron and steel, paintings and art work, furniture, plastics, etc., are at present selling their goods with reduced margins to remove excess production heaps from their warehouses and recover at least the costs.

Sheng Danni, Sales Manager at Zhejiang Hero Metal, on being asked tells TDB that prices this year are already far below last year’s level so there’s not much room left to negotiate further with Chinese suppliers. Pointing to a four-seater rocking wood-and-metal table-chair set, he said, “This set is priced at $325. Last year it was priced at $420. How cheaper can it get? Of course, in rare cases you may ask for another 1-3% of discount on FOB while placing the order.” If we are to believe Danni, Chinese exporters are not so rigid this year even about MOQs (Minimum Order Quantities). “Last year, our MOQ for this set was 75 units. This year it’s 38,” he continued, with his index finger still pointed at the four-seater set.

Real Illusion

Much of our experience at the Canton Fair’s 2015 autumn edition was about change – changed attitudes, changed gestures, changed expectations, and changed population. But not everything about China or Canton has changed in the past year or so.

Live from Canton Fair, 118th session 2015: Shots from Hall 4.1 Area B (Pet products). Prices quoted for most products across all these halls were lower than that in last edition of the Canton Fair.

The Chinese still don’t speak English and they still don’t care – even at the fair. [We did luckily happen to run into a few English-speaking folks though.] The food at the fair hasn’t changed and Indian importers (especially vegetarian)looking to spend a day or two at the fair may want to avoid experimenting with lunch at Canton. Standard payment terms in most cases haven’t changed. It remains 30-70 TT (meaning 30% of the total bill has to be paid in advance and the rest when the product is being shipped), though we found more number of sellers willing to be more flexible with payment terms this year, with a good number willing to adopt the 30-50-20 or 30-40-30 format (the last portion of 20% and 30% respectively is to be paid on delivery and inspection at the destination port). As far as percentage of spare parts goes, all exporters remained stuck to the usual 1-2% figure.

From an importer’s point of view, Canton still remains a mega showcase, worthy of a few days of exploration. The Dollar Business team visited over 1,500 stalls, spread over an area of one million square metres and housed in over 50 halls across three areas (A, B & C). The largest of the three areas – Area A included categories like kitchenware, gardening products, pet products, glass artware, weaving, rattan and iron products, general and art ceramics. Area B saw products like gifts, festival products, furniture, spa equipment and home decoration being showcased. And Area C housed toys, personal care products, toiletries, clocks, watches, optical instruments and household items.

Stall of Nice Cooker Co. Ltd. in Hall 3.1 in Area A that attracted many visitors and was unique because of the attention paid to branding and product set-up at the store.

True, you could choose to view thousands of products over a B2B portal and buy additional agent services to ensure quality, but to catch a glimpse of an array of products that can be potential bestsellers in your country with a less than 180-degree rotation of the neck, to haggle with sellers on ground, the touch and feel of products that look alike but may not be, to even be able to meet hundreds of inspection and shipping agents at a single location, perhaps high-school economics cannot explain the experience of Canton.

From an economist’s point of view however, the ride ends when you exit the Canton complex. The fair is a case study – one that explains how China's supremacy in exports is under clear and present danger. Not only because the world feels so, but because the Chinese say so.

As far as being an Indian is concerned, you feel more than pride when eyes at Canton stalls share glares with total love lost! That’s when a question pops in your head, “Is Make in India for real?” And all that you do is give a sardonic smile with a satisfied look…for a selfie.

This article is a result of a visit to the Canton Fair in Guangzhou, Guangdong (China) by Steven Philip Warner (Editor- in-Chief) and Manish K. Pandey (Editor) of The Dollar Business. Product categories worth importing (based on conditions of a threshold demand in India and profit margins) were identified, of which a few were shortlisted (based on editorial judgement). These have been presented in the following pages of this cover story.

Making Sense Of The World’s Factory

Imports From China That Can Become Box- Office Hits In India

Pet Products

Kitchenware

Furniture

Wristwatches And Clocks

Art And Artefact

Ceramics

Paper Products

Pet Products - A ‘Paw’Fect Lucrative Import Idea. [Can Sniff It?]

With growing numbers of Indian pet owners spending lavishly to pamper their four-footed friends, there cannot be a better time than now to import pet care and grooming products from China. A Chinese manufacturer can provide you a dog bed for as low as Rs.145. Already smell big margins?

Be it the packaged, ready-to-eat, food products or swanky accessories like dog collars and shoes, or the pet care products like sleeping beds or fur shampoos, the modern-day pets in India are getting pampered like never before. And the adage of ‘it’s a dog’s life’ no longer suits these pets who are now being spoilt for choice for all things luxurious. Thanks to the growing disposable incomes, which have also fueled pet adoptions (Indians are adopting over 600,000 pets every year), the pet care industry in India is bounding ahead throwing myriad opportunities to look beyond the conventional.

According to the London-based market research firm Euromonitor International, “among the BRIC markets (Brazil, Russia, India and China), the relatively underdeveloped Indian market offers the brightest growth prospects in pet care sales.” The report states that the pet products in India have shown great improvement with value growth of 137% over the last five years. And the trend is likely to continue, at least in the near future.

This obviously means music to ears for importers. With pet ownerships becoming an affordable luxury and a style statement in India, importing China-made pet products certainly makes for a lucrative business proposition. Ask Anand Pittie, Director, ABK Imports and he will tell why importing of pet care products, especially from China, make sense. “The pet industry in India is growing significantly. This is one of the rare niches which has not been explored much. We are live examples of the success story in this business. And when it comes to China, the profit margins go up to 15-20%. Plus, you have a price advantage.”

He is right! A dog bed (depending upon the size), for instance, in the wholesale market, could cost between Rs.500 to Rs.3,500, if it is manufactured in India. However, the same product will cost between Rs.145 and Rs.1,200 if it is sourced from China. Similarly a cat bed set (including small, medium and large beds) would be available in prices ranging from Rs.1,000 to Rs.2,500. The same set would cost not more than Rs.700-1,200 if it has a ‘Made in China’ tag. Then there are other products such as pet toys, pet collars, shoes, cushions and pet clothes that promise better returns if sourced from the Dragon country.

While manufacturing in India could be an option, importing them from China and selling in India makes more sense. In fact, an importer can expect margins as high as 40-50% (on some high-end pet accessories and products) if he/ she is willing to take the pain of retailing the product. And with demand expected to move only northwards, margins are bound to expand. Sounds lucrative, doesn’t it?

Kitchenware - For A Change It Is Not The Chinese Cuisine That Is Trending

There is a kind of Chinese invasion that is waiting to happen. And, before you arrive to the wrong conclusions, it is the cookware from China, high on utility value and low on price, which is going to invade Indian kitchens. Not to say, importers of kitchenware from China can expect a gala time.

For those burdened by the drudgery of a gamut of processes of cooking – from chopping and slicing the grocery to spicing up the cuisine and not to forget cleaning up the mess – here is an innovative range of kitchenware that would cater to maybe even your most fervent wish for a more convenient alternative to your rather cumbersome experience.

With lifestyles changing at supersonic pace and rising expectations, the concept of modular kitchens have today become an integral part of home architecture. And the kitchenware from China is proving to be one of the must-haves, adding state-of-the-art utility value in such kitchens. The Chinese repertoire of customised for convenience and comfort comprise induction cookware of steel, graters, steel cutlery, air-tight plastic container sets, dinner sets and lunch boxes. Well, you may exclaim that these gadgets are also available everywhere even in India, so why should one go for the Chinese brands. A relevant question and equally natural for anyone to pose it. We also have same questions before stepping into the kitchenware segment at the Canton Fair and what we saw of the variety and range on display had all these doubts vanish in a jiffy. The difference is in the improvisation and innovation in kitchenware. Apart from this, you have an extensive range of appliances, from tongs to graters to cookers, which enable you to perform a wide range of tasks in the simplest possible manner.

Although there are established Indian players that manufacture and sell kitchenware, their offerings are relatively high-priced. In fact, even at the wholesale level, some of the kitchenware sourced from China are about 15-25% cheaper than those manufactured domestically. For instance, a set of 10 plastic containers (of sizes ranging from 0.5 to 2 liters) is priced at Rs.200-250 whereas the same costs around Rs.450-550 in India. Likewise, a self-stirring cup priced at Rs.500-1,000 in India is almost four times of that in China where its price hovers between Rs.150 and Rs.220.  What’s more? While a 4X1,000 ml container set is priced at Rs.100, price of a 4X400 ml is tagged at Rs.65 in China. Not to say, an importer can easily garner a 20% plus profit even if he/ she functions at a wholesale level.

Despite its domestic capacity and capability, India is an importer of kitchenware. India’s imports under HS code 73239390 - table, kitchen or other household articles, and parts thereof, of stainless steel – was valued at a little over $5 million.  And the good news for prospective importers and buyers is that China was the biggest source. This is not all, to add to this, China is also the India’s biggest exporter of tableware and kitchenware of plastics under HS code 392410 with procurements valued at $6 million and accounting for nearly 60% of the total valued at a little over $10 million. Well, the reasons are simple – low cost and high margins! What’s more? The Indian Kitchenware market, which is estimated to be in the range of $400-450 million, is pegged to grow at around 21-25% each year in near future.

Considering the psyche of the Indian kitchenware consumers, who are always choosy when it comes to value-added utility at affordable price, the Chinese range is always going to be the preferred option. Further, with the Indian middle-class rising up the income ladder, the demand for modern kitchenware is bound to increase. If the domestic industry can’t meet it, it’s the import that will have to fill the gap. And if that is the case, sourcing them from China certainly makes for a lucrative business proposition. Doesn’t it?

Furniture - Low Risk, High Demand And... Great Margins

Thanks to India’s neo buoyant middle class, the demand for trendy furniture is on an upswing, and like never before! In fact, India’s furniture import is galloping ahead at double-digits with China accounting for about 60% of the total overseas supply. If this reason is not enough to justify its import from the dragon, high profit margins associated with products, surely is.

If you are looking to import furniture for home, office, or outdoors, and do not mind the ‘Made in China’ label (the quality is good, if not excellent, we assure you, having seen them first hand at the Canton Fair), you may be in luck! Prices of furniture (made of plastic and those with metal frames) and fixtures ‘Made in China’ have crashed by 15-20% (year-on-year) this year and hence promise better returns if sourced from the dragon!

The pavilion that was exhibiting furniture this time at the Canton Fair had a literal cornucopia of designs, from traditional European to modern Chinese, as well as the minimalistic Scandinavian. A similarly bewildering range of products were on display – leisure tables and chairs, bar stools, soft chairs, outdoor furniture to name a few. In fact, China has an entire district devoted to manufacturing, wholesale and retail of furniture. The Shunde district in Foshan City, about 40 km south of Guangzhou city in Guangdong province is also known as the furniture city. The 10-mile long Furniture Market, located in Lecong Town, Shunde has a total area of 3 million square meters, and is the biggest furniture market in the world housing 3,450 furniture manufacturers from both China and abroad. It’s no wonder now that prices of furniture in China are so low that it would boggle the mind of a buyer.

India is also no small fry when it comes to furniture, with the industry estimated to be worth $17.9 billion and accounting for a 19% share of the world’s total import of furniture. However, the trouble though is that 85% of the industry is in the unorganised sector, and economies of scale are yet to be leveraged by most manufacturers.While metal and wooden furniture continue to be imported, India seems to have done rather well in the plastic furniture segment with prices comparable to those in China. Importers thus need to choose their segment(s) carefully before arriving at the decision to import from China. The business proposition of importing furniture from mainland China and selling it in India makes more sense when one works out the margins these products can fetch.

A fairly sophisticated ergonomic mesh swivel office chair, which sells for anything between Rs.2,400 and Rs.3,500 at a retail store in India, would cost about Rs.1,850 (including duties and freight charges) if imported from China. If sourced from China, such chairs can easily fetch an importer profit margins ranging from 15% to 30%, depending on the product sourced.

Similar is the case with glass dining table. One that would set you back by about Rs.5,000 in Indian retail stores would cost as low as Rs.2,750 (after paying freight and duties) if sourced from China, leaving the importer with a considerable profit. This is the reason why most organised retailers and wholesalers of furniture and fixtures in India either import them directly or buy it from other importers. An ASSOCHAM study says that India’s furniture imports are surging at the rate of around 27% annually, with China accounting for around $447 million or about 60% of India’s total furniture imports worth around $736 million.

The case is quite different though in case of plastic furniture. If one was to import stackable chairs from China, he/she would would end up paying nearly Rs.860 per chair (CIF value), with additional duties of almost Rs.230. This would amount to Rs.1,086 per chair. But, considering that it is possible to find a similar chair at a lower price in India, it may not be the best of ideas to import plastic furniture from China at this juncture. The overall industry scenario seems to be in sync with our analysis; import of plastic furniture from China, which saw a positive growth until FY2014, declined by 2.9% in FY2015. The decline in China’s supply can also be attributed to India’s growing plastic industry. In FY2015, $9.86 million worth of plastic furniture was exported from India, showing a 26.6% growth.

And while we talk about such utilitarian things like office chairs and glass dining tables let us not forget the luxurious and elegant outdoor furniture that China can offer. Two pieces that caught our attention include gorgeously designed gazebos with swings and a beautiful four-person rocker with a shade on top. This rocker which was selling at $425 per unit last year is up for grabs at $325 this year. You would not like to miss the opportunity. Would you?

Wrist Watches And Clocks - ‘Timepieces’ – Two Time Zones. One Profitable Idea.

Trust the Chinese workmanship and aesthetics to amalgamate artistry with utility values? Well, one more evidence of their time-tested creations finds expression in the range of timepieces. While low prices make these clocks and watches attractive to price-sensitive Indian consumers, the high margins persuade Indian importers to invest crores into the trade.

Mention watches and clocks, the Swiss makes come to mind within a jiffy. But wait a sec! Here is a revelation that would inspire you to breakaway from this mind-block. A walk through the stalls of watch and clock makers at Canton Fair in China and you are treated to an amazing range of clocks and watches guaranteed to provoke temptation in you. Well, what follows is an inevitable inclination to just not look at the clock while deciding on your pick from the array of clocks and watches, since you are so enamored with the varieties and choice on offer that selecting from among them can prove to be rather difficult. So, what is it that makes the Chinese manufactured watches so different and attractive? For one, the USP is in their designing and customisation.

If the idea is to showcase deep pockets, maybe the Chinese variety may not be the choice. But if the objective is to make a style statement at an affordable price, China is exactly the place to source these time pieces. In fact, the latter is the clinching factor that makes Chinese clocks and watches preferred over their pricier and posh counterparts from other parts of the world. And that’s where the opportunity lies for you as an entrepreneur or an importer.

China offers an array of clocks and watches that can sell like hot cakes in India’s price-sensitive market, particularly in Tier 2 and Tier 3 towns. The price tag of wall clocks, wrist watches and table clocks starts from as low as $2.5, $1.2 and $2.2 per unit respectively to a maximum that you are willing to shell out.

Even if one takes into account the logistics cost and import duties, the product can easily fetch an importer a 16-20% margin in the Indian market. And if you want to take the pain of retailing the margins will only be travelling northwards. This is the reason why most retailers of clocks and watches in India either import them directly or buy it from other importers.

If this seems straight out of fiction, here is another fact that makes it stranger than that – these timepieces are made of metal, leather or good quality plastic, which means high value at incredible price. What’s more? This transaction also comes with warranties and guarantees attached – at least one year warranty or 1% of the total shipment as spares.

There is a considerable demand for Chinese watches and clocks in India which is reflected in the imports from the country. In fact, China is India’s second biggest source of watches and clocks – falling under HS code 91 – after Switzerland, valued at a little over $77 million during CY2014. Switzerland’s exports to India during the same period were $160 million. Although exports from Switzerland are more than double that of China, the volumes imported by India presents an interesting facet. For instance, under HS Code 9102 (wrist or pocket-watches) China had exported 19,662,536 units valued at a little over $37 million to India in CY2014 compared to Switzerland’s 163,586 units valued at a little over $62,179 million. This indicates that almost 90% of Indian demand (by volume) for imported wrist or pocket watches was met by imports from China. Another interesting factor that emerges from comparison of volumes and values between the two countries is that the per unit cost of the Chinese products was a mere $2 compared to Switzerland’s $380.

Even when it comes to battery operated wall clocks and alarm clocks – falling under HS Code 9105 – it’s China that rules the trade. Out of India’s total import of $7.65 million under the said HS code, $6.14  million worth of clocks are being sourced from China (data for CY2014). That’s a near monopoly!

All these factors point to the fact that middle-class segment in India prefer ‘Made in China’ clocks and watches, while the costlier watches are fancied by those few upmarket customers who can afford to dig deep into their pockets. Evaluation of exports to India over the last two years also indicates an upward swing in favour of China. Indian imports of clocks and watches from China increased from $34 million in CY2013 to $37 million in CY2014. Well, if industry insiders are to be believed, the situation is not going to change anytime soon.

India’s big market size for the Chinese variety of clocks and watches can open up a floodgates of opportunities and avenues for Indian importers planning to venture into this area. And with demand expected to move only northwards, margins are bound to expand. Sounds lucrative, doesn’t it?

Art And Artefact - With Love, From The World’s Biggest Art Factory

For years, artworks have been synonymous with the very rich and famous. But not any longer! In current times, art and artefacts are not just confined to plush mansions, but are finding place in living rooms of modest middle-class families. Courtesy: affordable ‘Made in China’ masterpieces! Are you game?

If you thought that stylish home décor and luxury-living habits are only a rich man’s game, think again. The works of art, which earlier used to be reserved for the rich and elite, have found a new abode in India’s burgeoning upper-middle class who are now viewed as ‘aspiring luxury home buyers’.

The rich and famous Indian consumers might have often turned to the West to find their home interiors match their grandeur and ultra-plush lifestyle, but luxury is no longer just about marble flooring imported from Italy, German bath-fittings, designer Swiss couches and modern American paintings. The growing desire to rise above the line and live in fancy houses that appeal their aspirations has created demand for what is known as ‘affordable luxury’, reflecting the evolving Indian tastes to spend on things that interest them.

Driven by high disposable incomes, combined with the surging interest in art has spurred the emergence of lucrative affordable art business – no longer dominated by the American and European artists and there is a huge market for it in India. Apparently, the home space is being transformed into a story told through designs. The rising trend towards fancy living has overall benefited the art and craft industry in India. With multiple options available for home décor, this nascent industry has opened doors for unprecedented business opportunities in the country.

But given that art and artifacts come with a price tag, what could possibly be sold so cheap that generates mass demands and makes for a lucrative business proposition? The Dollar Business figured the answer to this puzzle at Canton Fair in China where we found many works of art and craft worth importing (of course, based on the demand and profit margins in India).

For instance, contemporary artworks such as canvas printings, oil paintings, collector pieces, miniatures of vintage cars, aircraft are some of the many affordable art and artefacts that would not only add value to your homes but also to your wallet. Significantly, the affordable versions of these masterpieces, imported from China, are not only making a style statement in several Indian homes, but are also slowly turning into big businesses for many, with the market in India expanding for these small-format art.

If a survey from retail consultancy firm Technopak is any indication, the Indian home décor market, which stood at $13 billion in CY2010, will touch $30 billion from the current $20 billion by CY2020. Not to say, imports of paintings and drawings into India over the last decade have grown from $9.07 million in CY2005 to $34.97 million in CY2014.

Although the West retains an edge when it comes to works of art and craft, the Chinese abstract paintings and other artworks have become a hot commodity in the past few years. Courtesy: contemporary art and affordable pricing. To give you an idea, an attractive ‘Made in China’ abstract painting in square shape, at the wholesale level, would cost Rs.500-1,000 while that made in India would start only from Rs.2,000. Besides cost being a factor, lucrative margins involved in importing these art products from China also persuade importers to take up its trade.

Then there are other attractive craft items like antique looking miniatures that are appealing and suit a modern day lifestyle. The influence of India’s rapidly burgeoning middle class for home space has provided for a competitive and cost-effective market – a market that cannot be ignored.

Given the demand for contemporary, affordable handcrafted home décor items, the Chinese art and craft items are best suited for the Indian market. From telephone booth to ship containers, from vintage cars to scooters from Eiffel Tower to aircraft to Transformer trucks – there are myriad options of artefacts, antique lookalikes and collectibles in China. You name it and they have it! And if sourced from the Dragon country, all these products can fetch an importer high profit margins and that too in the wholesale market. If you are still not convinced, consider this: how about sourcing a small China-made Eiffel Tower artefact, at a wholesale level, at $2.2 a piece? Cheap. Isn’t it? But when gifted to someone would certainly bring a smile worth a million-dollar.

So, the next time you scout for a destination to source attractive and affordable ‘masterpieces’ that would ensure high margins, you know where exactly you need to head!

Next Page: Ceramics - Serve It In Style

Ceramics - Serve It In Style

When one thinks about ceramics the first thing that comes to mind is floor tiles, and China has been exporting them at prices that has forced India to impose anti-dumping duties on them. But there are many other ceramic products from China that still have a readymade market in India. And margins? At times, over 50%!

You have cooked a simple fare for dinner when friends suddenly turn-up. If you are left wondering how to wow them with what you have cooked, presentation is the key, and for presentation nothing beats fine bone-china or porcelain tableware. Some of the tableware that we saw at the Canton Fair this time are conversation pieces in themselves. When you really think about it, ceramic products are a great way to make your house beautiful – be it with statues, tableware, or even floor and wall tiles.

Tableware is possibly the easiest and fastest way to bring colour and style to your dining table. It can be made of various materials, but when we think of tableware, our mind usually goes straight to bone-china and porcelain, and how delicate they are. Surprisingly, porcelain is also the one of the strongest and most durable of tableware.

A fair share of India’s porcelain and ceramics tableware comes from China. Out of the $18.6 million worth of porcelain and china tableware India imported in FY2015, 64% came from the Asian giant. In fact, India’s imports of tableware from China have seen a 26.83% growth between FY2014 and FY2015.

This brings us to the obvious question – why bring in the fancy dinnerware from China? Why not just source it from Indian manufacturers? The reasons are simple – low cost and high margins! For instance, if one imports a 21-pieces dinnerware set from China, he/she would have to pay just about Rs.740 per set, and that too after paying for freight, insurance and duties. The discounted price (discounting being the name of the game with most e-tailers) for a similar 21-pieces set on a major e-commerce site starts from Rs. 1,800, which means that the importer stands to gain a 58% profit margin – a highly lucrative deal, indeed.

Ceramic tiles, however, are a completely different story. Morbi, Gujarat is where about 70% of ceramic tile production takes place, with around 600 factories that produce these tiles. India’s consumption of ceramic tiles is 650 million sq. meters, and production is at around 750 million sq. meters, which means there is more than enough to satisfy the Indian customer.

China is the world’s biggest producer and exporter of ceramic tiles, with more supply than demand. So, when the government’s decade-long ban on ceramic tiles ended in December 2014, Chinese tile companies started to dump their tiles in India again. However, with the infiltration of Chinese ceramic tiles into the Indian market, the producers of Indian tiles saw serious competition from the Chinese, and prices automatically went down, which was a major blow to Indian manufacturers. Many Indian manufacturers raised this issue with the Indian authorities, which led to a renewal of the anti-dumping duty earlier this year. The cost of importing ceramic tiles from China after application of anti-dumping duties leaves very little margins to motivate an importer.

To cut a long story short, in the fast growing Indian market, importers stand to benefit by importing porcelain and bone-china tableware and statues, but should draw the line at importing ceramic wall and floor tiles from China. Give us a deaf ear if you want to!

Paper Products - Plain Paper. Big Business. It’s Time To Act Smart

Each time you pick up a paper napkin or a facial tissue, the probability is high that it is imported. And what better place than China to source them – an export hub that offers toilet or facial tissues with volume-driven margins as high as 20%!

In today’s highly hygiene conscious world, sanitary paper products have become a necessity and are omnipresent in households, restaurants, hospitals and a host of other places. And India is no exception! The country’s requirement for the product can be gauged from the fact that its total imports (by volume)   under HS code 48030090 – of toilet or facial tissue stock, towel or napkin stock and similar paper for household or sanitary purposes – in CY2014 was a staggering 3901 MT, with imports from China contributing just 210 MT to it.

Although, as of now, China’s market share in India’s total import under HS code 48030090 is insignificant, Chinese products hold a promise of making further inroads into India’s expanding market and scale up their share. The reason is not hard to surmise. Indian Paper Manufacturers Association (IPMA) data shows that, in the last four years, imports of paper and paperboard (excluding newsprint) have risen at a CAGR of 21% and 18% in terms of value and volume respectively. And, in most of the cases, cost of imported paper or paper product remained lower than that of production cost in India as the raw material cost has gone up in India in recent years. This makes a strong case for its import from China and indicates prosperous times for those importing it.

What’s more? The sanitary products produced from 100% virgin wood pulp from the Pine tree and Eucalyptus tree and also recycled material, apart from their dirt and sweat absorption capacity, comes in attractive packages and prices that are unbelievably low. For instance, while a 100 sheet box of facial tissue is priced at Rs.16, four-roll pack of toilet paper of sheet size 10.5x9.5cm comes with a price tag of Rs.24 if imported from China. These prices are way lower than that of their India-manufactured variants. According to estimates, price of toilet or facial tissue stock, towel or napkin stock and similar paper procured from China are less than half of the market prices of that manufactured in India or other parts of the world. And, not to say, there is a proportionate increase in profits based on volumes ordered. The more the quantum, the higher the margins.

Interestingly, from logo creation to packaging, all needs are taken care of if an importer wants to source them on a big scale. As the widening demand-supply gap with respect to primary raw material for the industry – wood – only means imports from China will continue to remain high, making its business a round-the-year profitable proposition.