Are there important developments in China?

Michaela Kretschmer Export Director Pantano Sebastiano Int. Purchasing Manager Of SSG Germany: "We want to sell high quality finished products"
Luís De Sausa General Manager of Dimpomar Portugal: "We simply sell blocks to China, or close the quarry"
Advertising the Chinese way
Fanny the editor of ISI with Mr. He: "We show how cooperation works between Germany and China"
Photo attached Dido Liu CCPIT: "We are here to help you enter the Chinese market."

China purchases raw materials world wide with import tax at zero. The door to finished materials is ajar, however with an import tax varying from 10% to 24% for finished products. Will this change?

With the current developments in China, it looks positive. Naturstein visited Stonetech fair held in Shanghai 6th-9th April to explore the potential the fair offers foreign exhibitors and visitors. 

There is no doubt that the Chinese market is an important market for international natural stone companies and will remain so for the foreseeable future. The use of natural stone in the construction of hotels and high rise office blocks in China has had a big influence on the international stone industries business model. Gone are the days when Europe led the way in block distribution. The Chinese are purchasing blocks directly from the quarries in colossal quantities. How to enter this valuable market with finished products, not just blocks: To survive the never-ending financial catastrophe in the USA and Europe, it’s imperative that the International stone industry finds inroads into this market with a higher end product value. One way to enter the market is to consider exhibiting at one of International trade stone fairs in China.

It would be simple, if promotion were the only hurdle to jump. When one talks about exporting finished material to China one gets mixed reactions, mainly because the situation is politically constructed, therefore confusing. European companies still face high barriers to enter the  Chinese market. It is clear that we are not playing on an even pitch, the main restrictions being the low value of the Yuan and the import tariffs on imports from countries outside ASEAN system (Association of Southeast Asian Nations).The import tax for countries in the ASEAN system ranges from 0% to 5%. The import tax for those countries in the WTO (World Trade Organization) is more complicated. The graph in the box headed “Chinese Import Tariffs” provides all the current Chinese import tax percentages as supplied by the CCPIT (China Building Materials Federation), the organizers of Stonetech. However, it is the low labour costs and the zero import tax on blocks which cause the most antagonism.

Would it make it easier for companies to export finished materials, if the quarries refused to sell raw materials to China? Naturstein has spoken to international companies regarding their opinion on the hot issue “Should we sell blocks to China?” The reaction differs from country to country, plus, it is a moving target as opinions are changing. Most countries export blocks to China, Turkey is the Number 1 exporter followed by Iran. To or not to sell raw material to China is not a simple question. The general manager of the Portuguese company Dimpomar, Luís De Sousa, has a positive attitude; "Sure I sell blocks to China, that’s why I’m here. Many quarries are refusing to supply blocks to China and often complain about companies that do. All I can say to these people: Where would the stone industry be now without the Chinese market? The American and the European markets are dead. The stone industry has changed so much; the value of natural stone has fallen alarmingly. I have a quarry of Rosa Aurora. This material was always a popular high quality material; however, since 9/11 the sales have dropped through the floor. In 12 years the number of working quarries in this material has fallen from 250 to 50. It is this simple: Either I sell to the Chinese or I close the quarry."

Some companies told Naturstein that they do not sell blocks, wanting to save local material for the future. Foreign companies are having problems selling finished material into the Chinese market, because often a competitor does sell blocks to China of the same material. It is impossible to successfully tender, because the blocks arrive in China with no import tax and are produced in companies with low overheads and labour costs. This problem also extends to the international market. Often projects are lost to a Chinese company, and when one considers that the company was quoting for their own material, then one gets hold of the gravity of the situation.

Will this situation change? If the pressure of the environmental issue and the internal labour problems have an impact, then the answer is yes. Naturstein spoke to the CCPIT organiser of the Stonetech fair. They report that there are foreign companies making inroads and certainly more will follow. Ms Dido Liu of CCPIT told Naturstein: "There are changes. The Yuan has been linked in value to the US Dollar for the last few years. With the fall of the Dollar this has helped the Euro economies to enter the Chinese market. The new agreement of the Chinese government to allow the Yuan to revalue in controlled stages opens up even more avenues. While the people of China are taking this opportunity to travel abroad, stone exporters are frowning, because  their labour and raw material costs are rising and the return from exports is decreasing.  Some European companies sense the coming opportunities, especially in the high end market. Mr. Du, the purchasing manager of Hongda Real Estate, told us that he found the material Crema Marfil at Stonetech a few years ago. It has become one of the most popular materials in hotel applications."

For the international companies who or: who wants to export to China it is important to "keep their eyes on the ball." The situation is changing and the CCPIT are very conscious of the developments - and as they are connected to the government and the organisers of Stonetech, they have volumes of information to help the stone industry to do just that. "We want to help the exporter to China", Ms. Dido Liu said. “That’s why we have supplied you with the import tax chart. We realise that the tax is an important issue. At the moment there is no clear voice on whether the import tax will be changed, but there is a growing pressure to reduce it. Ms Liu names two reasons: Firstly the 5 year plan encourages increased imports on sophisticated processed goods; secondly China is on the low-carbon and resource-reserving edge and under pressure to reduce its consumption. The importation of finished materials will help and will be welcomed.

China is a big cake, it is important that the international stone industry gets a grasp on some slices. Next year Stonetech will be held a little later 20th—23rd April in Beijing. The government is promoting the development and urbanisation of North China, especially the Bohai-rim Economic Circle, of which Beijing is the strong hold. The capital is the link between The Bohai-rim Economic Circle, (the major economic area of Northeast China) West China and the emerging stone market in the Middle East. More importantly we are actively promoting Stonetech 2011 to the developer, architect and designer in Beijing and Shanghai. Our aim is to boost this year’s increase in the high end buyers.” Please see box Sector Analysis of Visitors Stonetech 2010.

It is becoming evident that the Chinese are interested in the European high quality products, especially in the top end market, and they do have internal problems regarding increasing costs. A good case in point is Turkey: Although it is the No 1 exporter of blocks to China, there has been a change of policy. The IMMIB (Istanbul Mineral and Metals Exporters Association) recently reported that the volume of exports of raw materials fell by 10% in 2009, blamed mainly on the increases of energy and labour.  Now the Turkish government is actively encouraging Turkish and Chinese companies to cooperate and demand that more of the premium finished work to be produced in Turkey. The promotion of high quality production was certainly a major focus point at Marble 2010, Izmir Turkey.

Stonetech and Xiamen are the two most important stone fairs in China. The importance to visit and exhibit at one of the international trade fairs in China cannot be ignored. However, which one? There is not simple answer to this question. Both fairs have their advantages and both are important. Ms. Fanny, editor of our cooperating Chinese magazine ISI (International Stone Information Magazine) says. "Both exhibitions are the most important International fairs in China for the buyer and the exporter. While it is obvious that Xiamen had far more visitors, it must be taken into account that there are over 2,000 trading companies in the Xiamen area. The fair is also open at the weekend and is regarded as a local event, so all the family and friends go there for jollifications; therefore many of the visitors are not buyers.

Stonetech is open only during the weekdays; therefore it’s primarily attended by buyers. It is held in Shanghai and Beijing rotating annually. Neither city is a stone centre, but both are important business  centres, easily reachable for the developer, architect and designer . Both fairs have a high number of exhibitors and are worth visiting, if you are buying or selling. If you want to purchase materials from China, because of the sheer volume of companies in the Xiamen area, then the Xiamen has the edge. If you wish to sell high quality finished products into the Chinese and Asian markets then, Stonetech has the edge."



In conclusion: The Chinese market is to large to even contemplate refusing to sell raw materials. However, companies could be selective on which raw material to supply. The Chinese Architect, designer and developer are especially interested in light coloured, high value materials. Perhaps, the Turkish solution of cooperation is one to consider, especially because the machine industry and some stone producers are already successfully working in cooperation with Chinese manufactures. The Yuan is presently rising in value against the Euro and labour costs are being pushed upwards by the unrest of the Chinese work force, especially in the south. If China is really interested in promoting imports, for the reasons the CCPIT gave, then it will happen very quickly, therefore it is important to keep a profile in the Chinese market.

The close proximity of the fair dates is certainly makes it difficult for the European to participate in both fairs. Which fair to attend? Both fairs equally offer opportunities, not just for the Chinese, but also for the emerging Middle East markets. As Ms. Fanny of ISI magazine pointed out it will depend on your personal market requirements. For importing to Europe Xiamen has the edge and for exporting to China and the middle East Stonetech has the edge.

Reservations have began for Stonetech 2011 for halls 1-8. You may visit www.stonetech.com  for more information.

>>>Facts an figures about General Duty Rate on Import Good
>>>Interim Duty Rate on Import Good
        
Brian Gurteen- Naturstein Germany