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RMB appreciation and B2B exhibitions The South China Morning Post (SCMP) reports today that "Stronger yuan bites into trade fair receipts."

According to the SCMP, fear of a stronger yuan combined with increasing commodity and labour costs had an effect on the recent Canton Fair.

The only evidence the SCMP cites is a 2.3% dip in visitors compared to the April edition - of course, this change could have been the result of a wide range of factors. In addition, most organisers would be quite pleased with 199,266 visitors.

The SCMP, however, is not alone in thinking about this issue. In September, Global Sources released a survey of 239 Chinese exporters. Close to 70% of the respondents said that they expect (Chinese) exports to decline if the yuan appreciates. 32% expect their business to be negatively impacted even if the yuan only appreciates 1%-2%.

These fears seem overdone. Where are buyers from the U.S. and Europe going to shift their orders? Perhaps Indonesia or Vietnam. But switching manufacturers comes with costs - especially if the manufacturer is in another country. Buyers are unlikely to make such a drastic move because of a 2% or 3% increase in the value of the yuan. In the end, China's manufacturing capacity has become so massive, there is no real alternative to China.

It is true that the largest buyers from Europe and the U.S. have already hedged their bets by setting-up some alternative manufacturing bases outside of China. For those large buyers, switching is easier, but that is unlikely to have a material impact on B2B exhibitions which are visited by buyers of all sizes.

In the last decade, China has become the manufacturing base for the rest of the world and in support of that it now has a portfolio of 500+ B2B exhibitions. Vietnam and Indonesia have less than 50 trade fairs. A stronger yuan may help drive some growth in those markets, but it is likely to be incremental growth - not at the expense China's trade fairs. We expect net sqm sold at Chinese B2B exhibitions to lead the region in 2010 and 2011 - despite the inevitable appreciation of the yuan.

Posted by Mark Cochrane at 3:39 pm Labels: China, economy, exhibitions, Global Sources, rmb

