Ap  Thoughts from China:

Our week in Hong Kong and Southern China has confirmed what we are hearing from our US furniture manufacturers, wholesalers and retailers: business is slow in Asia, inventory is backing up, and there remains plenty of excess capacity.

After visiting 8 factories and attending one show (HD Show in Hong Kong), we saw first hand the rising costs of doing business in China. FX issues were a main point of emphasis, as the RMB/Yuan has crept up this year and most pundits feel the pressure to float the currency on a more market basis is inevitable. Labor costs are up with the advent of Chinese unions, and the VAT tax rebates are clearly going away. Construction remains brisk all over China, so we know building material costs are increasing globally due to supply & demand. Lastly, the Chinese electrical grid remains inefficient and too small to cope with the demand, so utility prices are up significantly, with recurring brown outs and scheduled black out periods.

We know of several multi-factory corporations closing their South China factory, diverting production to Vietnam, or less populated China, then selling the factory for a huge financial gain. We call this the California syndrome: lose money in the furniture business, but get rich on your real estate.

We are frequently asked about the environmental and “green” issues of Chinese manufacturing, and this is certainly a more public issue following the lead paint debacle with toys and the dog food scandal. We believe that the Chinese, just like Americans, and people from all over the world, will have mostly good people doing good things in this area. There are some crooks and bad guys everywhere, but our inspections of factories and interviews with Asian owners gives us hope that the furniture industry is doing it mostly the right way.

While our focus is typically in residential furniture, we saw plenty of work in the hospitality arena and the growing office/contract segments of the furniture industry. We expect more of these products to be produced in Asia in the coming months and years.

Having recently completed our week in High Point, then jumping on the plane Saturday 6^th to go to China, we must make a few comments about Market week. The attendance was down and a lot of people are suffering. Business is just not good, and there are no signs for a recovery for some time to come. So, batten down the hatches and survive. We were pleased with many of the improvements in the High Point Market infrastructure and amenities. Keep it up! However, people in China are talking more about the very successful Shanghai show (held 3 weeks ago) more than the Las Vegas Market.

Mergers & Acquisitions remain very hot topics, both in the public and private arena. We are very busy selling furniture companies, holding in-depth discussions with strategic, financial and international buyers.  Let us know if we can help you. Call or email us with your thoughts.