EU markets 'top priority'

The EU also applied separate five-year anti-dumping levies ranging from 8 to 35.1 percent on imports of coated fine paper from China.

On April 1, the EU terminated collection of anti-dumping duties on leather shoes imported from China, which had been in place for four years. The move came one year after China lodged a complaint against the EU at the WTO.

But "many Chinese exporters, confronted with the anti-dumping and anti-subsidy cases, have yet to form effective organizations to deal with such problems," Ding says. "Indeed, the EU's anti-dumping and anti-subsidy investigations against Chinese export companies have been increasing in recent years. But judging from experience, such investigations harm the interests of the two sides."

On March 18, the EU also increased import duties on Chinese ceramic tiles by up to 73 percent from 5 percent. The duties will be in place for six months. The commission is also considering whether to impose definitive duties, which could be valid for five years, by Sept 18.

Chinese ceramic tiles exporters including Foshan Diamond Ceramics and Hongyu Ceramics in Guangdong province say that they will probably quit the EU market due to the increased duties.

"Our largest overseas market is not in Europe, but in Southeast Asia and Australia. Profitability is small in the low-end European market, while shipping costs are high. If necessary, we will consider leaving the market," says Deng Weibo, deputy general manager of Foshan Diamond Ceramics.

He says many of his European clients have expressed fears of Chinese companies exiting the market.

Apart from the trade frictions, Chinese exporters should pay close attention to the debt crisis in Europe, Ding says.

"The debt crisis affects European demands and the region's recovery from the economic crisis, and therefore China's exports. Another thing is Chinese exporters should be well prepared for the fluctuations of the euro."

On exchange rate, UIBE's report concluded that the nation's foreign-exchange reforms and the continuous yuan appreciation against the US dollar have not exposed Chinese exporters to the severe risks that had been expected, although the majority of them have felt a negative impact.

Since July 2005, when China launched foreign exchange reforms, the yuan has gained 26 percent against the US dollar.

Seventy-five percent of the interviewees agreed that this has had a huge impact on Chinese exports. But 57 percent disagreed that the appreciation of the currency has exposed them to operating risks.

"The expectation of yuan appreciation and the active measures taken to avoid a negative result have made Chinese companies almost immune to the changes," Ding says.

However, only 4 percent of the interviewees said they have a complete understanding of the foreign exchange reforms. Sixty-percent said they have basic knowledge, but 35 percent said they had not taken any measures to avoid the currency risks.

"On the whole, the yuan has been keeping stable even with a little depreciation against the euro, judging from the Nominal Effective Exchange Rate, although in the first fourth months of this year, the yuan has been appreciating against the US dollar," Ding says.

"However, in the long run, the yuan will undoubtedly become a stronger currency, so that Chinese export companies need to strengthen their management of exchange rate risk and lower their costs through adjusting internal management, especially the portfolio and the quality of the products," he says.