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China’s growth a double-edged sword

Published March 7, 2012

TAIPEI, Taiwan (BRAIN) Mar 7 2012 1:54 PM MT—Encouraged by a new trade agreement that eliminates duties on bikes and parts shipped across the Taiwan Strait, Taiwanese exporters are betting on future business in China.

Last year, Taiwan shipped 30,000 bikes to the mainland with 5 percent duties, compared with 10,000 in 2010 with the former 12 percent duty. The average value of those bikes was $500. That’s 10 times the average value of the half-million bikes Taiwan imported from China last year. (Click on link above to download the PDF newsletter from Taipei Cycle.)

Tony Lo, president of the Taiwan Bicycle Exporters’ Association, said he expects Taiwan’s export value to China to reach $200 million. Lo praised Taiwan’s President Ma Ying-jeou for enacting the Economic Cooperative Framework Agreement (ECFA) during his first term, which gradually reduced duties on a number of consumer goods made in Taiwan. President Ma, who was re-elected in January, attended the opening ceremonies for Taipei Cycle on Wednesday morning.

“Under the ECFA framework, we see very positive outcomes,” Lo said as Ma listened from the front row of the packed press conference.

Industry suppliers have been keeping a close watch on China for the past several years, predicting a potential boon for midrange and high-end products. Currently in China sales of high-end bikes only make up 8 percent of all sales, and midrange bikes make up 17 percent. The majority of the market is for low-end bikes, said Yu Shi Guang, director of the China Bicycle Association. The potential for premium bike products is in China’s urban areas, where disposable income is rising and the middle class seeks luxury products to signify wealth.

Shi Guang said the China Bicycle Association has a five-year plan to make the country friendlier for bike sales. That includes campaigns to promote cycling culture, a directive to increase the quality and quantity of components made in China, incorporate higher-end raw materials such as titanium into manufacturing and optimize sales models to reach consumers through online sales and better in-store customer service.

“China could be the largest world market in the future. It is one of the best opportunities for the industry in the future,” Lo said, speaking later in the day at the International Bicycle Trend Forum held at the show.

But there are some side effects to the promising growth in China. Increased demand from emerging markets, in particular China, has stretched supply thin and lead times for key products are lengthening. Wait times for Shimano drivetrains at the Deore level and below have reached 120 days, or longer in some cases, as more suppliers get in line for product. If there’s no similarly priced alternatives with other component manufacturers, suppliers have no choice but to wait, or place bigger orders earlier, said Phil Tinstman, Masi brand manager.

“It’s difficult. It makes us either stock more product or go without,” he said.

Nicole Formosa

Topics associated with this article: Tradeshows and conferences

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