High Prices at the Fair

Early in the morning, shoppers lined up behind a rope guarding the entrance to the ten-story building. At precisely 8:30, an attendant dropped the barrier, and the race was on. The buyers sprinted through the doorways for the elevators; some of the more vigorous bounded up stairways in an attempt to get ahead of the crowd. It was not a rush for cut-rate panty hose at a discount house; rather, it was the scene at this spring's version of the semiannual Canton Trade Fair, where Chinese traders showed off their wares to the largest collection of foreign businessmen ever. And it was a bust: the eager foreigners found far more high prices than bargains.

Expecting the Chinese to continue their policy of pricing commodities well below world levels, a record 30,000 foreigners, including about 150 Americans, turned up for the month-long fair, which ends this week. They were shocked to find that the Chinese have hiked their prices up to or even above world market scales. Rugs were up 200% over a year ago, and antiques and jade are going for 40% to 300% more than last year. The price of mao-tai, the potent millet liquor, has soared to $28 a bottle--more than twice the price of Chivas Regal.

The big price hikes clearly nettled many foreign buyers. The roughly 3,000 Japanese in attendance seemed undaunted, but most American firms were forced to curtail purchases severely, if they made any at all. A U.S. garment buyer, asked to pay $32 each for cashmere sweaters that sold at last November's fair for $9, bristled: "I can get them cheaper in Taiwan." Some exceptions to the nonbuying rule: Sears, Roebuck, Bloomingdale's and Macy's made purchases of furniture, rattan and handicrafts, and West Coast importers Huntington & Rice placed orders for Chefoo white wine, which will retail in the U.S. for about $3.50.

Western experts offer a variety of possible explanations for the price boosts. The Chinese need more foreign currency to cover the cost of importing expensive Western technology, such as $300 million in petrochemical and synthetic-fiber plants recently ordered from The Netherlands and Japan, and they may have simply overestimated demand for their products. On the other hand, they could be trying to camouflage an inability to produce large quantities of some goods by pricing them high enough to discourage big orders. In that case, they may have succeeded all too well and discouraged many buyers from coming back at all.

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