Where American customers are too “risky”

GUANGZHOU, China — For years, Victor Kaindaneh of Sierra Leone bought his company’s building supplies in Dubai, using that city’s annual trade fair to find factories and negotiate supply chains.

This year, Kaindaneh brought his business to China instead. Lured by the promise of even lower prices on everything from nails to the hotel where he stayed for a month, Kaindaneh and his colleague skipped the United Arab Emirates’ trade show and opted for Canton Fair — China’s oldest ongoing export marketplace.

Here, in the heart of southern China’s manufacturing hub, tens of thousands of buyers from around the world converge several times a year to hear sales pitches and negotiate deals with Chinese factories and their middlemen.

Kaindaneh is impressed with China so far and has decided to give this country’s exports a try, ordering a test batch shipped to Sierra Leone in coming weeks.

“It’s just my first time here, so we’re going to try it out and buy one container,” he said while wandering through the wide corridors of Canton Fair. “It does seem better to buy in China; products are good and prices are much better. I’ll save 20 to 25 percent here.”

Kaindaneh is part of the fast-changing face of China’s new export customer base. Throughout Canton Fair — widely looked to as a barometer of who is buying what and how much from China — trading companies report a huge increase in customers from Africa, the Middle East and small eastern European countries, even as American and western European buyers have dwindled, staying home amid the global financial crisis.

At the trade fair, American customers are few and far between, but Middle Eastern and African company representatives are clearly helping boost buyer numbers. Business is down overall, the vendors say, but considering the world’s economic slump, things could be much worse.

Coming into this round of Canton Fair, most vendors expected very little by way of new business. But what they’ve found is that there is new hope for Chinese exports in emerging markets.

“The market is changing and right now business is still pretty good,” said Phoenix Zhou, a young woman selling ornamental garden pottery made by a factory in central China. “We’re getting some new customers this year from different countries.”

Michael Yang, who works in marketing for a plush toy company in Shanghai, said this is a year when Chinese manufacturers don’t expect to make much money but simply hope to stay in business long enough to see the export market pick back up.

“Most of the plush toy factories in China have already shut down,” said Yang, whose company used to rely mainly on American and European clients. “We’ve made a decision to keep going. Now we’re just trying to find new markets.”

Given the U.S. credit crunch and a growing number of bankruptcies and unpaid orders, he said: “We don’t have any American clients now. It’s just too risky.”

Yet there is a hard truth for Chinese exporters in the new customer base. Americans and western Europeans tend to buy more, at higher prices. Clients from emerging markets want better deals. That is evidenced by the fair’s own statistics: Visitor numbers are down just 0.3 percent from last year, but sales volume is 14.9 percent lower than what it was in 2008.

Americans used to accept our prices and demand better quality, said Luca Chen, a marketing representative for a decorative lighting company in Shantou. With the emerging customer base, the bottom line is the top priority, a difficult fact for many Chinese export companies already operating on thin profit margins.

“They’re always asking for lower prices and bargaining. It’s a tough situation,” Chen said.

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