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THE FURNITURE INDUSTRY IN CHINA Report published by Csil, Centre for Industrial Studies Press release of the latest edition of the Csil Country Report: The Furniture industry in China including Hong Kong, June 2007 Pages . 224 Price Euro 1000 World furniture trade amounts to about US$ 90 billion. The degree of market openness is continuously increasing across the globe, from East to West. New furniture production bases are gaining ground and the overall scenario is changing fast. China is a leading player on the global furniture market, having produced more than US$ 50 billion of furniture in the year 2006 of which about one third reaches foreign markets. Furniture production which recorded two digit annual growth in the last decade, far exceeded the country’s average industrial growth rate over the same period. Among the strong points the low cost of labour, the ability to attract investments, the relative row material abundance and the future development of domestic demand. Among the weakness of the Chinese furniture industry two issues stand out: low labour productivity and the high dependency on imported raw materials. This last factor makes the Chinese furniture industry particularly vulnerable to variations in international trade prices and is bound to gradually erode the other traditional competitive advantages such as low labour costs. The overall situation, however, is changing. Sector experts suggest that two factors will affect the furniture industry in the coming years. The first one is the rising level of competition due to the gradual opening up to imported products as well as the integration of the national market. This is likely to result in slow yet progressive sector concentration with the weak firms failing and the more efficient ones merging and growing. Secondly, the Chinese economy is becoming more and more dependent on domestic demand, with the government encouraging family expenditure and trying to control the flow of exports. Consequently, Chinese firms are investing more and more resources in expanding distribution networks as well as improving marketing and sales services. Domestic demand is in fact bound to play an increasingly important role as a sector driver. With average annual growth of almost 22% in the last decade, furniture consumption seems destined to continue this positive trend in coming years. The favourable current situation is the result of a combination of factors such as the buoyant construction sector, the government policy of encouraging private consumption and, more generally, the rising household incomes. At present, the Chinese market is made up of about 370 million families, with over 40% of the population living in large urban areas. More than 50% of the Chinese population is concentrated in the Southern and Eastern provinces, which are among the richest and most industrialised ones. The 1.3 billion of Chinese consumers can rely on a per capita GNP of US$ 1,740. And Chinese families are spending more and more, both in non-durable and durable goods, including furniture. Yet Chinese urban households feature a high propensity for saving, the saving rate amounting to almost a quarter of disposable income, which is still very high if compared with other countries such as European ones. However, it is estimated that the Chinese saving rate is likely to gradually decrease in the coming years thanks to the prospective development of the financial markets as well as the establishment of a reliable social safety net and according to official forecasts, total private consumption will in fact continue to grow in the future. Construction is also one of the priority sectors for the Chinese economy, with increasing foreign investment, increasing population and increasing migration of the population towards cities. Nowadays the process is not limited only to coastal areas, but it is spreading inland and also to the west. Furniture demand will increase accordingly. And on the export front, having overcome Italy as the world largest furniture exporter, China is more and more playing a central role in the international scenario. If you are thinking of doing business in China, then Csil Country Report China will offer you an overview of this area, providing information on the local market and the competitive system. Profiles and contact details are included for the leading Chinese companies operating on the market as well as for the leading exporters. Csil Country Report China will also offer you information on the factors affecting furniture demand as well as data for the furniture production system, and the import and export flows by country. For information contact: Giovanna Castellina email: castellina@csilmilano.com

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