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Global downturn shows up later in inland provinces

THE impact of the global downturn on China's inland provinces has appeared later than in the coastal regions, companies and officials said at the 20th China Harbin International Economy and Trade Fair.

The impact had been delayed by four to five months in northeast Chinese provinces, especially in the construction industry, said Zhang Hou, board chairman of Heilongjiang Province Construction Group.

"Business began to drop in February. Orders from developed countries have been canceled since then and it has been spread to Southeast Asian countries and Africa, which hit our ambition to expand overseas," Zhang said.

The firm had hoped for the growth rate to be 100 percent last year but achieved only 25 percent, and it expects this year's growth rate at only 35 percent, Zhang said.

"I have not felt the recovery yet," Zhang said.

Smaller share

His view was backed by Zhang Yongqun, general manager of the state-owned Songjiang Plywood Factory in Heilongjiang, whose trade volume tumbled 20 percent in May.

The plywood factory mainly sells products in China, which helped the company stay relatively stable amid the downturn, Zhang said.

"The domestic market is a big cake which everyone wants to have a bite of. More companies, especially those in the south of the country affected by the crisis, turned to the cake so that each now has a smaller share," he said.

"China's economy looks like a falling domino, spreading from southern to northern provinces," he added.

A similar metaphor was offered by a banker named Xiao Zhigang. "Like the winds, the crisis landed in China first on the Yangtze River Delta and the Pearl River Delta economic zones and later spread to nouthern regions," Xiao said.

The situation is also true in other inland provinces. Zhongjia Abrasives Company, from Yangquan City of north China's Shanxi Province, had been losing overseas clients during the crisis and it wanted to find new ones at the five-day trade fair, which ends today.

"The crisis's impact grew larger in March and April for us," said Yang Bin, sales manager of the company whose exports make up 70 percent of its total business. It mainly exports abrasives to the United States, Pakistan, India, Malaysia and Egypt.

The company had increased the price of cheaper products slightly as the expensive products could not be sold, Yang said.

"The competition had become stiffer that our profit has been reduced to 10 percent from the previous 15 percent," Yang said.

Other companies said China's 4 trillion yuan (US$585 billion) stimulus plan, unveiled in November, was working and positive signs could be seen.

The domestic market and markets in Europe and Southeast Asian countries had been more active, which is a positive signal, said Liu Guangwei, general manager of the Import and Export Trade Company of Harbin Bearing Group.

The company had enjoyed success but things began to turn bad in 2009. Many overseas clients canceled orders, saying they were overstocked, Liu said.

"We analyzed it and found that it was the rising price of steel which drove our sales of bearings, which was not normal, and the crisis hit us forcefully this year," Liu said.

Positive attitude

The companies had been keeping faith amid the downturn, and became even more active, said Guan Haibin, deputy general director of the fair.

"A more positive attitude appeared among the companies amid the crisis," Guan said.

Statistics from the State Grid Corporation of China showed that electricity consumption in some of China's inland provinces and regions, including Heilongjiang, Xinjiang and Tibet, had increased in May while the provinces of Shanxi and Qinghai as well as Ningxia Hui Autonomous Region and Inner Mongolia Autonomous Region posted a drop in power use. Consumption also declined in coastal Jiangsu and Zhejiang provinces.

However, the impact of the crisis had been limited for three reasons, Guan said.

He said Chinese firms in the north focus on the domestic market while their southern counterparts are mainly exporters. Secondly, the stimulus plan was launched before the crisis hit the northern areas. Thirdly, the initial recovery of the southern economy had brought new opportunities for the northern economy.

The 20th fair has lured 120,000 exhibitors and buyers from nearly 70 countries.



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