Thursday 27 November 2008

Evolution Proves Key to Survival of China’s Shop Front

Canton Fair grew from a melting pot of traders into a grand bazaar

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Evolution Proves Key to Survival of China’s Shop Front

Canton Fair grew from a melting pot of traders into a grand bazaar

Denise Tsang
27 November 2008

Retired merchant Charles Chan recalls vividly how in the 1970s he squeezed into a Lo Wu-bound KCR train at Sheung Shui station through the window and changed trains several times before reaching his destination of Guangzhou to source wigs and old, simple watches from the Canton Fair to sell in London.

For the next decade, he kept returning to the provincial capital every spring and autumn for the massive fair until he had made his “first bucket of gold” and switched to importing frozen prawns from the mainland.

“The Canton Fair was a massive flea market or perhaps a window on China with virtually a limitless array of relatively low-value goods from livestock to bicycles,” said the Hongkonger who immigrated to Britain in the 1960s. “Only mainlanders were exhibitors until a few years ago.”

From its humble beginning in 1957, the Canton Fair has been the popular name of the Chinese Export Commodities Fair - renamed the China Import and Export Fair last year - a melting pot of traders in the 1970s that became an export-driven show during the country’s industrial boom in the 1980s and 1990s.

It has earned a reputation as a trade show on the mainland second to none in shaping the country’s thriving foreign trade over the past 30 years, and served as a barometer for exports in boom and bust times.

Traders from mainland provinces or as far away as Latin America have for years paid triple the standard hotel room rates during the fairs every spring and autumn, to check out the latest commodities on offer, be they electrical appliances, down jackets, toilet tiles, toys, curtains or shoes.

The massive display of usually low-value and labour-intensive consumer goods is partly because of its location in the Pearl River Delta.

The popularity of the fair grew when the mainland opened to foreign visitors. About 19,300 visitors from 98 countries led by the United States and Europe attended the fair in 1978, the first year of the country’s opening and reform, according to official statistics.

It was a fruitful event, with buyers and exhibitors signing US$4.33 billion worth of business in 1978, up 34 per cent from 1977. Trade has since ballooned so rapidly that 198,000 visitors from 210 regions inside and outside the mainland poured into Guangzhou last year, a more than tenfold jump from 1978. Business is still brisk, with US$73.84 billion worth of deals generated last year, 11.4 per cent higher than in 2006.

But the fair could never have grown so big without challenges. To shrug off an outdated image and fend off punishing competition from e-commerce, it relinquished its venue of 38 years at the Liuhua centre and herded about 6,500 exhibitors under one roof at the modern centre at Pazhou last month.

Second-generation entrepreneur Danny Lau Tat-pong, 58, recalled going to the fair as he was being primed to take over a manufacturing business his parents had set up in Hong Kong in the 1960s. He moved the factory to Dalong town in Dongguan in 1987 and has since produced architectural coatings and aluminium curtain walls for Hong Kong and mainland property developers.

“I used to go with my father some 20 to 30 years ago to source supplies for our factory,” he said, noting he was unimpressed then by the “chaotic and crowded” trade show.

“In the past few years, I have only taken the Canton Fair as a chance to catch up with old friends. Customers no longer place orders during the fair as times have changed.”

As technology advances, the Canton Fair competes also with a growing number of regional trade fairs such as the Yiwu commodity trade show in the Yangtze River Delta and smaller trade exhibitions in Dongguan, Hong Kong and Macau.

The latest autumn trade show saw the Pazhou Complex fill 1.1 million square metres of exhibition space for 45,000 booths, compared with 130,000 square metres 30 years ago. It was held over three sessions, each for five days in October and November. Size matters but quality is important, particularly in the past few years as the mainland races to move up the value chain with higher technology.

Electronics, heavy duty and precision machinery have stolen the limelight of the state’s propaganda machine, and visitors’ attention.

Two years ago, when the central government started encouraging the development of the domestic consumer market and reducing reliance on exports, the fair invited importers to the party. Last year, a 15,000-square-metre exhibition space was dedicated to strictly selected importers such as those from the US, Hong Kong and Thailand.

“Times change and the market changes,” said entrepreneur Paul Yin Tek-shing, whose father was among industrialist pioneers in Hong Kong and the mainland in the 1940s. “But the Canton Fair still provides a one-stop service that can’t be replaced.

“It offers a prime opportunity for traders from as far as South Africa and Latin America to rub shoulders with Chinese counterparts.” said Mr. Yin, who regularly leads delegates from the Chinese Manufacturers’ Association to the fair. He said the way out for exporters facing difficult times was to pry open the mammoth domestic market, cultivate their brands or manufacture products with original design.

As the nation pushes on with its economic transformation, the role the fair will play in spurring foreign and domestic trade is uncertain. How will the fair “add value” to trade in the wake of a fading need for middlemen in overseas trade? Will it become a window to the mainland’s high value-added and technology-driven commodities as state leaders wish?

The unfortunate convergence of a global financial meltdown and new regimes on taxation, labour and exports will doubtlessly make these questions more critical.