China has rolled out measures to help foreign trade companies expand into the giant domestic market to hedge against the uncertainties of foreign trade. For China’s exporters, switching to sell in the domestic market comes along with challenges, including adapting to different standard and price systems and domestic consumer preferences. However, China wields great power in tackling trade pressure as it has a huge domestic market with 1.4 billion potential consumers. To help smooth the transition, the Ministry of Commerce (MOFCOM), together with local governments and enterprises, has been taking intensive actions to help foreign trade firms alleviate operational pressures since April. “The Ministry of Commerce will focus on helping 10 major provinces in foreign trade and consumption, and carry out a series of special matchmaking activities around key industries,” said Sheng Qiuping, Vice Minister of Commerce, during a recent conference. The events have mainly focused on helping industries with foreign trade advantages like light industry, household appliance, furniture and home furnishings, and food.
“As the world’s second-largest consumption market, China has the largest middle-income group in the world, with stable growth in investment and consumption and enormous potential,” said Xu Man, Researcher at the Chinese Academy of International Trade and Economic Cooperation. Domestic online and offline retailers such as JD, Alibaba’s online trading platform 1688, as well as Yonghui Superstores, said they would like to provide more domestic sales channels for foreign trade firms facing export obstacles. For instance, 1688 said for foreign trade companies with inventory backlogs, the platform will provide sales assistance and reduce commissions, and those companies can also negotiate a cooperation model with the platform.
Hangzhou Kara Pet Products Co, a foreign trade firm that mainly makes cat stands, dog beds, plastic feeders for pets and dog chains, said it has exported products to multiple countries and regions such as the U.S., Europe, Australia and Japan, and its annual output value has exceeded CNY200 million. The company’s recent business has been affected by tariff uncertainties. “For products we have finished manufacturing, U.S. customers didn’t cancel the orders and they asked us to suspend the shipments. Facing such a situation, we believe that we still need to consider building overseas factories,” said Chu Qinqin, Founder of Hangzhou Kara Pet Products. Chu said orders from the U.S. accounted for one third of its total, and the company plans to further expand its business in other countries. In the past few years, it expanded the overseas markets in Japan, Russia and Brazil, and businesses from those markets began to pick up last year with growing demand from consumers. “The suspension of the U.S. orders has little impact on the operation of the entire company, and we remain optimistic. We also sell in China, with a change of styles of the products, despite the number of orders being much smaller than the exports,” Chu said. She added that if foreign trade firms would like to further shift the businesses domestically, they need to get used to process smaller orders, as people tend not to stock up goods in China, given intense competition.
Peng Jianzhen, President of the China Chain Store and Franchise Association, said with the ongoing consumption upgrade trend, China has a large number of opportunities for exporters to expand local sales if there are supplies of high-quality, new type products that meet the demand of domestic consumers. “For China’s foreign trade firms, they have many products that sell well in developed countries. If they make some adjustments to cope with the demand of domestic consumers and domestic standards, there is room for further growth,” Peng said. Guangzhou Boqun Textile Technology Co, a textile maker of knitted and woven products, said due to uncertainties of the foreign trade business, it plans to expand sales channels in China to offset the impact. Last year, the company’s foreign trade business accounted for 60% of the total. Despite the volume not being significant in the U.S., tariff uncertainties have had a negative impact on the firm. “This year, we plan to shift our focus to the domestic market due to tariff policies and intensified competition in foreign trade. Domestic customers have indicated a growing demand for some foreign trade products,” said Li Zheyu, General Manager of Guangzhou Boqun Textile Technology.
More exporters are pivoting to the domestic market, and the trend fits with China’s growing efforts to boost domestic demand. In the Government Work Report released in March, expanding consumption was listed as a top priority among this year’s tasks, and various promotional activities are expected to be carried out nationwide throughout the year. The Commerce Ministry, together with five other departments, launched the inaugural “Shopping in China” campaign on April 13. Boosted by multiple favorable policies, China’s consumption market has shown a trend of steady growth. In the first quarter, total retail sales of consumer goods in the country reached CNY12.47 trillion, up 4.6% year-on-year. Catering revenue came in at CNY1.4 trillion, growing 4.7% on a yearly basis, according to the National Bureau of Statistics (NBS), as reported by the China Daily.
