TO THE POINT: As illustrated by the current session of the Canton Fair, China's exports are staging a swift comeback, though uncertainties lie ahead. In its drive toward a more sustainable economy, the country bumps up lending for the western regions and small businesses. Foreign banks are losing ground in China due to a lending spree by local rivals. Online travel agents scramble to pledge the lowest prices for hotels as they tap an over-crowded market. Also under pressure is China Mobile that recorded slower profit growth for the first quarter of the year. China launches an international commodities trading platform in Beijing on April 20.

By HU YUE

Fairing Well

Where is China's crisis-stricken export market heading? The latest session of the China Import and Export Fair, known as the Canton Fair, a bellwether for the trade climate, could provide some clues. With more foreign buyers roaming the fair's vast halls, the bustling trade show is providing a vivid illustration that an export turnaround is already underway.

The first phase of the Canton Fair from April 15 to 19 witnessed export deals worth $17.1 billion, up by a robust 9.8 percent from the fair's last session in October 2009, said Canton Fair General Secretary Wang Zhiping. Given the export downturn that saw financially distressed foreign buyers purchase less or demand lower prices, this upward trend is a reason to rejoice.

Though in part driven by restocking of Western factories low on inventories, the export recovery is largely a result of recovering overseas demands, said Wang.

But the sector is not without concerns. A note of caution came from He Weiwen, an economics professor of the University of International Business and Economics. "With the European debt crisis escalating, the euro is likely to lose some value against the Chinese currency yuan, putting Chinese exporters on the hook," he said.

In the long run, Western countries are refocusing on manufacturing and exports, intensifying competition with China, He said.

Rebalancing Commitment

While reining in excess liquidity, China has left the lending tap wide open for small businesses, western regions, consumption and agriculture as the country gears up to rebalance the economy.

"Efforts have been doubled to encourage financial institutions to lend more to areas that are crucial for the national economy or those that have yet to receive adequate credit support, such as agriculture and small enterprises," said Zhang Tao, Director of the Financial Survey and Statistics Department of the People's Bank of China, the central bank.

The new loans extended to underdeveloped western regions in the first quarter grew by 29.6 percent year on year, 5.8 percentage points higher than the eastern regions, according to the central bank.

Meanwhile, outstanding loans for small enterprises had totaled 6.3 trillion yuan ($922.7 billion) by the end of March, an increase of 23.9 percent from a year ago—6.5 percentage points higher than that for large enterprises.

Banking Woes

While Chinese banks enjoyed a lending spree last year, their foreign counterparts in China seem to have lost some of their fizz.

Foreign-funded banks accounted for a minimum 1.71 percent of the country's banking assets last year, according to a central bank report, down from 2.16 percent in 2008 and 2.38 percent in 2007.

A wild expansion of foreign banks in China has occurred over the past few years, drawing strength from their deeper and more sophisticated product offerings and global client relationships. But as they spread across the country, they face daunting challenges in private banking and wealth management from Chinese rivals, which are eager to diversify away from traditional lending business.

Foreign banks entering new markets frequently use competitively priced corporate loans to form initial relationships with new clients. But this door has been closed by the low margin and availability of loans from the large Chinese domestic banks, said Raymond Yung, PricewaterhouseCoopers' Financial Services Leader for China.

In a move to spur growth, Chinese banks opened the floodgate of lending, with new renminbi loans totaling an eye-popping 9.59 trillion yuan ($1.4 trillion) last year.

But analysts think the lending binge has put a dent on the capital adequacy ratio of Chinese banks, offering an opportunity for foreign banks to snap up stakes in their Chinese counterparts.

Travel Sector Price War

As China's travel market booms ahead, a price war could be in the making among the travel agents.

On March 10, Ctrip.com, China's top online travel agent, announced to provide the lowest price for online hotel reservations. If customers find lower prices elsewhere, they will be compensated three times the price difference, said the Shanghai-based company.

This move sent a shockwave throughout the industry and prompted smaller rivals to follow suit. Cui Guangfu, CEO of Elong.com, accused Ctrip of market monopoly, and pledged to keep prices on par or lower than Ctrip's.

After spilling red ink for 10 consecutive years, the Beijing-based Elong raked in profits of 19.9 million yuan ($2.9 million) in 2009, though barely 3 percent that of NASDAQ-listed Ctrip.

The price war reflects the heated competition in the crowded sector. Analysts say online agents had mushroomed across the country to carve up a bigger slice of the growing travel pie. More disturbing is the fact hotels and airlines are making a push into direct sales, skipping online agents as the distributors.

That is also why agents are trying to consolidate customer bases and strengthen bargaining power with hotels and airlines, said Chen Chi, Vice President of Kuxun.cn, a lifestyle search engine.

But low prices are not enough to foster customer loyalty, and the agents must further improve their services and wean their reliance on hotel reservations as a source of income, Chen said.

China Mobile's Profit Slows

China Mobile Ltd., the country's top wireless carrier, posted a net profit of 25.5 billion yuan ($3.7 billion) in the first three months of 2010, up merely 1.1 percent year on year, compared with 24.9 percent of the first quarter of last year.

China Mobile faces adverse factors such as market saturation and fierce competition, said Wang Jianzhou, Chairman and CEO of China Mobile.

Since last year China Telecom and China Unicom have adopted aggressive strategies, such as handset subsidies, to attract users and challenge the dominance of China Mobile.

Trading Base Launched

The China International Commodity Trading Platform (CICTP) was launched in Beijing on April 20 to help small and medium-sized enterprises (SMEs) explore the domestic and international markets.

With a total investment of 300 million yuan ($44 million), the platform is jointly set up by the Ministry of Commerce and the Ministry of Industry and Information Technology.

It will provide a variety of services for SMEs home and abroad, including product exhibition, information sharing, and branding and marketing, said Xu Chunjing, President of the CICTP, at the inauguration ceremony.

It will own at least 1,000 member enterprises and become an effective vehicle to facilitate communication and cooperation between SMEs, said Xu.

In addition, the United Nations Global Trade Point Network (GTPNet) has linked with the base to share the latest trade and investment information, said Bruno Lanvin, President of GTPNet.

Hi-Tech Expo

The 13th China Beijing International Hi-Tech Expo will be held in Beijing on May 27-31. This year's expo will focus on enhancing the capability of innovation and accelerating the transformation of the development pattern of Chinese companies.

Expo events include exhibitions, summits and project promotions. More than 2,000 companies from home and abroad have confirmed their participation and 20 business people from global top 500 companies will attend the expo for an advisory conference with the mayor of Beijing.