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China's US$2-billion bicycles export industry continues to brace itself for tough times, as new challenges have arisen since Global Sources first analyzed the industry in July 2005. Despite the numerous hurdles, most suppliers remain positive of increased export revenue in coming months, particularly in view of the steadily rising demand for electric, mountain and children's bikes, as well as the growing popularity of innovative folding models. To boost sales further, they are constantly upgrading product quality and exploring new markets. One of the major issues concerning bicycle makers is the announcement of the China government to reduce export tax rebates on locally made bicycles and bike parts, as a means to manage the country's excessive trade surplus. From 13 percent two years ago, subsidies dropped to 9 percent starting July 1, 2007. Even Shimano, a leading Japan based supplier of derailleurs and other bike parts, immediately felt the effect of the rebate adjustment. In August 2007, it correspondingly imposed a 4 percent markup on components manufactured at its China plants. To cope with the reduced tax rebate, a number of highly export-oriented China bicycle makers are studying the possibility of moving some or all of their production to developing countries and regions such as Eastern Europe, where duty-free trade and GSP schemes are enforced. Additionally, bicycle makers are dealing with pressures coming from some export markets. Canada, for instance, has ordered a reinvestigation on certain bicycle types originating from Taiwan and the mainland last June 2006. The scope of the antidumping review report includes assembled or unassembled bicycles with wheel diameters of 16 inches or bigger. Models with folding frames and stems, as well as those with FOB prices exceeding CAN$225 (US$214), however, are excluded. Possible adjustments to export price limits and tariff values will be reviewed after August 2007. The European Commission's antidumping duty on China-made bicycles, excluding electric bikes, is also still in place. In addition to these pressures, the escalating raw material and labor costs, coupled with the appreciation of the yuan against the US dollar, are hurting China bicycle makers' profit margins. Over the past two years, factory worker wages have doubled in some provinces in China. Meanwhile, the costs of environment-friendly nickel based batteries, and aluminum alloy used for making lightweight bicycle frames both have climbed by about 30 percent in the past 12 months Inevitably, all these issues will result in an industry-wide price adjustment in coming months. More than 90 percent of companies profiled for this report will raise prices in the six months ahead, with the majority planning to do so by 5 to 10 percent. Despite these challenges, most China bicycle makers are optimistic of export growth in the next 12 months. This is primarily because of the steadily rising demand for bicycles, especially from the country's main export market, the US.
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 All information contained in China Sourcing Reports is the result of exclusive, ground-level and definitive research conducted by Global Sources' analysts. Companies featured in these reports may or may not be clients of Global Sources.
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