Growing in Economic Strength

16 August 2013

Oldest trade fair tells story of China

On 5 May, China’s largest and oldest trade fair closed its 113th meeting in Guangzhou. It was attended by 203,000 foreign businessmen who signed a total of US$35.54 billion in export orders.

The Canton Trade Fair first opened its doors in April 1957 in the Sino-Soviet Friendship Building in Guangzhou; just 1,200 people came from outside the mainland, all by invitation, and 1,000 of them were from Hong Kong and Macao.

For the next two decades, it was China’s only window on the world, a place where foreigners could come to see and buy the country’s products. It was the only opening of a closed economy and a vital source of foreign exchange for the government. When they went home, those lucky enough to get an invitation recounted what they had seen and heard about this secret country – and their listeners were full of envy and admiration.

The fair remained open during two decades of political campaigns, a beacon of economic normality when millions were throwing their energy into political struggle. In the reform era after 1978, the fair has grown dramatically in scale, the number of products being exhibited and of buyers, with people coming from all corners of the world.

This growth has reflected the dramatic changes in China as it has become the world’s top exporter and second largest economy.

Today, even though other cities hold major exhibitions of their own products and those of a particular industry, the Canton Fair retains its place as the largest in the country. It has become one of the biggest trade fairs in the world, in terms of variety of goods and of buyers.

This is because of its history and infrastructure; the organisers have built larger and larger halls to accommodate the merchandise and the city of Guangzhou provides the financial services, hotels, restaurants and entertainment that the foreign clients need.

The history of the fair is the history of modern China.

Barter trade

After the Communists took power in 1949, they modelled the economy on that of the Soviet Union. The country conducted most of its trade through bartering with other Socialist countries via bilateral agreements negotiated between governments and without using foreign exchange. During the 1950s, China conducted more than 80 percent of its trade in this way; only foreign trade corporations under the Ministry of Trade and Foreign Co-operation were allowed to do business with the outside world.

But many people in the Chinese diaspora and the non-Communist world were interested in the country’s goods. So the Ministry of Foreign Trade and the Guangdong provincial government decided to hold a trade fair twice a year in Guangzhou, the city closest to Hong Kong and Macao; Guangdong is the ancestral home of most Chinese people living abroad.

The first fair, known at the time as the Chinese Export Commodities Fair, was held in April 1957 in the Sino-Soviet Friendship Building (which boasts an area of 18,000 square metres). Thirteen foreign trade corporations exhibited 10,000 products, 80 percent of them agricultural, and signed deals worth US$86.86 million. All the 1,223 visitors came by invitation only; more than 80 percent were from Hong Kong and Macao and the rest from 19 countries, mainly in Asia.

From then on, the fair was held twice a year, in spring and autumn, in different venues. In 1959, it was held in the Qiyi Road Exhibition Hall, which had space for 40,200 square metres of stalls. It hosted the event until 1974.

Ups and downs

The first 30 years of Communist rule were full of political campaigns that seriously disrupted economic life.

But the Canton Fair continued to operate every spring and autumn throughout these tumultuous years. It provided the most important link between Chinese business and the outside world, especially those countries not covered by state trading agreements; it was a vital source of foreign exchange during a period of great scarcity. In 1973, the fair accounted for 50 percent of China’s foreign trade earnings.

To show its importance, the top leaders from Beijing attended, including Premier Zhou Enlai, who went eight times, Zhu De and Dong Biwu, as well as senior officials from the Guangdong government.

In February 1972, Beijing and Washington normalised their relations through the Shanghai communiqué, enabling American business people to attend the fair for the first time; 44 attended the 31st session that year.

In 1974, the event moved to a new and enlarged venue, the Liuhua Exhibition Centre, covering 110,500 square metres, later to be expanded to 170,000 square metres. It was the longest serving venue, until 2008.

End of monopoly

China’s reform and open-door policies began at the end of the 1970s. This meant an end to the state monopoly on foreign trade; in the 1980s, private companies sprang up and foreign investors arrived. Many state companies were sold to the private sector.

The Canton Fair continued to play a major role; it adapted to the new realities by admitting non-state companies and widening the range of products on show. What it offered was a single venue at which foreign buyers could see many goods and conduct business at the same time. It was, and is, especially useful for people from distant countries who do not come to China often and have no permanent office here. It is a one-stop shop where they can get everything done, with translation, financial and advisory services available.

By 1987, the number of visiting delegations reached 100 for the first time; in 1993, the number of exhibitors reached 1,472. That year, export orders to the US reached US$1 billion for the first time. In 1994, the total volume of orders exceeded US$10 billion; by 1995, the percentage of manufactured goods had reached 86 percent, compared to 20 percent at the opening fair in 1957.

In 1997, IT products were displayed for the first time – and a working group set up to handle complaints about intellectual property rights, especially trade marks, patents and copyright. The fair launched its own website in 1999 – www.cantonfair.org.cn.

Entry into WTO

After more than 15 years of negotiations, China joined the World Trade Organisation in December 2001. It was a milestone; it gave the country better access to foreign markets and to a great extent depoliticised trade disputes. In the 12 years since, China has gone from being the sixth largest to the second largest economy in the world. In 2009, China overtook Germany and became the world’s largest exporter.

The Canton Fair has played a significant role in this growth. To keep pace, it re-organised the event, providing more space and more products. To accommodate it, the government built the largest exhibition centre in Asia, the spectacular Pazhou complex in downtown Guangzhou.

It has 16 indoor exhibition halls with a total area of 160,000 square metres, and outdoor sites totalling 220,000 square metres; it includes large space for meetings and negotiations.

In 2007, foreign products were introduced for the first time; at the first session of the International Pavilion, there were 629 stalls, covering more than 10,000 square metres, with 314 foreign companies from 36 countries and regions, including Macao.

In 2008, the Pazhou complex went into full operation and the Liuhua site went out of use, after 34 years. The number of industrial categories was increased to 50, to allow more specialisation.

Changing economic order

The most recent fair, the 113th, closed on 5 May after 15 days. It attracted 202,766 people from 211 countries and regions. It had stalls selling everything from household electrical appliances to machine hardware and tools, consumer goods to home decorations and textiles and garments to medical supplies.

The orders reflected the changes in the world economy, with those from the European Union, the United States and Japan falling from a year earlier, while those from the Middle East and the BRICs – India, Brazil, Russia and South Africa – increasing.

Liu Jianjun, the fair spokesman, said that short-term orders of less than three months accounted for 48.6 percent of the total, three-six months 35.1 percent and above six months only 16.3 percent. “This reflects the influence of the financial crisis,” he said. “Buyers are cautious in placing orders, while Chinese companies fear an increase in the price of raw materials and fluctuations in exchange rates. They do not dare to make long-term orders.”

Among the hottest items were needles, surgical gloves, face masks, and other medical supplies; in the first three days, sales of these items rose 92 percent from the previous fair to US$12.75 million, a reflection of the global concern about avian flu and other infectious diseases.

The next fair, the 114th, will be held at the same venue in October this year.

History turns full circle

The fair’s premier position in China is history turning full circle.

During the Tang dynasty (618–907 AD), China was the richest and most technologically advanced nation on earth and a major exporter of silk, lacquer ware and porcelain.

Guangzhou was the centre of a ‘maritime silk road’, the sea equivalent of the land routes across central Asia that took Chinese goods to the Middle East and Europe. Chinese and foreign ships transported these products to southeast and south Asia, Mesopotamia, the Middle East, the Arabian peninsula, Ethiopia and Somalia.

The city was home to over 100,000 foreign merchants, including Persians, Arabs, Hindu Indians, Malays, Sinhalese, Khmers, Cham, Jews and Nestorian Christians from the Near East. The foreigners lived with their families and had their own restaurants, meeting places and places of worship

In 748, Jian Zhen, the Chinese monk who would take Buddhism to Japan, described Guangzhou as a bustling mercantile centre with large ships from Borneo, Persia and Java ‘with spices, pearls and jade piled as high as a mountain’.

Since 2000, history has repeated itself. The city is again home to tens of thousands of foreigners, including Asians, Arabs, Africans and Caucasians. Like the Persians and Malays of the Tang dynasty, they have come because it is the ‘factory of the world’. Most make their living from buying goods made in Guangdong and other parts of southern China

The Portuguese were the first Europeans to arrive by sea, in 1514. They had set up a monopoly on foreign trade by 1517. Later they were expelled from the city and in 1557 granted the use of Macao as a place for trade.

By the mid-18th century, Guangzhou had again become one of the great trading ports of the world. The imperial government allocated an area of the city called the ‘Thirteen Factories’ where foreign companies, mainly from Europe, were allowed to establish warehouses and offices. It was the only place in China where foreigners were allowed to live.

It retained this monopoly on foreign trade until the First Opium War of 1839, which resulted in the opening of other cities in China. One of them, Shanghai, surpassed Guangzhou and became the country’s most important port and industrial centre. Hong Kong overtook it as the major port for southern China.

The fair has helped Guangzhou regain its place as one of the world’s major trading cities.

ends

MACAUHUB FRENCH