"We are worried that if our clients are short of capital, they might shut down," said Shunde's export manager, who would only give his surname, Zeng. "That's certainly bad for us."
China has been known as the world's factory for everything from toys to T-shirts, and exports have powered its growth in recent years. But exports are taking a hit from the global financial crisis because of lower demand from overseas and tightening credit from state-owned banks.
A slowdown in Chinese exports would ripple through the world economy as China imports fewer raw materials, half-finished goods for assembly and supplies, such as Australian iron ore or factory equipment from the United States, Europe and Japan. Raw materials used for exports made up half of China's nearly US$1 trillion in imports last year.
China's economy is still expected to expand by at least 9 percent this year, and its banks are flush with cash and hold little risky debt. But its economy has been weakened by a bursting housing bubble and an anemic stock market, and the hope that China's appetite for imports will rescue other countries has been tempered. China accounted for a third of global economic growth in 2007, according to the World Bank.
"We still believe that China's growth will be relatively robust. That is helpful for the world economy," said Louis Kuijs, the World Bank's senior economist in Beijing. "Unfortunately, one economy like China will not be enough to keep world growth going....China just isn't big enough."
The Canton Fair, which opens Wednesday, will offer a measure of demand for Chinese goods, as exporters and customers gather in Guangzhou, the heart of China's export-driven manufacturing industries. Philip Richardson, an American who manufactures high-end stereo speakers in Guangzhou, said orders from the U.S. have dropped over the past two weeks.
"When they see the markets go down, they stop buying," he said.
Customers have canceled meetings with him at a Hong Kong trade show next week. Nine of 12 retailers have backed out of visits to his factory in the past two weeks. And as he stood talking, Richardson received a phone call from the Chinese vendor who makes his stereo cabinets. The vendor said he had lost so many orders that he could not pay his employees, and asked Richardson to pay early on a bill due next month.
The financial crisis is the latest blow in an export situation that was already weakening along with the U.S. and European economies. According to customs figures, the growth rate for China's exports in the first quarter of the year declined for the first time in three years. Exports make up just 5 percent of China's economic output, but account for about 20 percent of growth.
Foreign sales of Chinese-made electric fans fell 21 percent in July from the same month last year, according the Chinese Household Electric Appliance Association. In a survey last month, the central bank said export orders at Chinese factories had fallen to their lowest level since 2005. One of the country's largest garment makers, Zhejiang Jianglong Textile Printing and Dying Co., went bankrupt last week.
"I don't think the economy has troughed," said Tao Wang, a UBS economist in Beijing. "That will affect China's demand for commodities, machinery and so on. In the next six months, I think imports from all these countries will slow."
The Tianjin Excellent Import & Export Co. southeast of Beijing expects this year's sales to drop to half the 2007 level of US$50 million. The company is trying to boost sales to Japan and other markets and might have to fire some of its 100 employees, its manager said.
"We don't have a better strategy yet to maintain the business," said the manager, who would only give his last name, Yang. "If we export US$1 million and need 50 people, then that falls to $10,000, you can do the math."
Exporters are also having a harder time getting credit because China's state-owned banks are trying to cut loans to companies with exposure to foreign risks, said Nan Hanxin, a banking industry analyst for Central China Securities. They now favor monopoly state-owned companies with high credit, Nan said.
The weakening of exports from China is showing up in fewer purchases of raw materials from other countries. China's appliance makers buy so much wire that a fall in export demand has led to a 23 percent drop in global copper prices since July, according to Standard Chartered Bank.
China's imports are also hurt by a slowdown in its domestic market. As both real estate and stock market values have declined, consumers are no longer as able or willing to spend on big-ticket items, auto market research firm J.D. Power and Associates said in a report.
For example, automakers counted on China to drive revenues as sales dropped in North America and Europe. But sales of Ford Motor Co. vehicles in China dropped 28 percent in August from the same month last year, while Volkswagen AG was down 20 percent and General Motors Corp. was off 16 percent, according to J.D. Power.
Slower real estate sales have cut demand for steel. Four major Chinese steel mills are responding by cutting output 20 percent, the government newspaper China Securities Journal said. That in turn erodes demand for iron ore.
Last year, the Canton Fair drew 190,000 buyers from 200 countries. But this year Shi Hong, general manager at a bicycle exporter, plans to skip the fair for a sales trip to Europe.
Shi said orders are down and retailers in Britain and France have put off submitting sales forecasts.
"We've already cut our costs," he said. "We fired three employees, one-fifth of our team."
Associated Press researchers Bonnie Cao and Yu Bing in Beijing and Associated Press Writer William Foreman in Guangzhou contributed to this report.