Canceled shipments, returned goods and a dearth of new orders have left exporters in China in crisis as the COVID-19 pandemic hits its trading partners worldwide — accelerating a long-standing push toward domestic consumption.
The world’s second-largest economy is stirring back to life after virus cases dwindled from a peak in February, when activity came to a near-halt.
However, recovery is hampered by lockdowns and restrictions overseas as the novel coronavirus continues its march across the planet, with exporters forced to look to domestic markets after years of selling overseas.
Photo: AFP
Chinese online marketplace Taobao.com (淘寶) said that the number of foreign trading companies opening stores on its domestic-focused platform spiked 160 percent from February to this month.
And policymakers — who have sought for years to wean the country off cheap exports and government spending in favor of domestic consumption — are welcoming the change.
“When there is no light in the west, there is light in the east,” Chinese Minister of Commerce Zhong Shan (鍾山) told reporters at a briefing this week.
Domestic sales from export businesses rose 17 percent last month and the Chinese government was supporting trading enterprises that specialized in foreign sales to tap the home market instead, Zhong said.
Foreign sales used to make up nearly half of toymaker Shantou Beilisi’s turnover, but this plummeted to just 5 percent after the virus struck.
Shantou Beilisi general manager Chen Zhuoyue told reporters that orders from his largest export markets, the US and Europe, are now “basically negligible.”
“Many countries there imposed lockdowns and the global flow of logistics is another issue ... these have affected our order volume,” Chen said. “There is also a rising number of unemployed overseas, and their purchasing power has fallen.”
Faced with few new orders and cancelations of existing ones, Chen said that the company is attempting more domestic sales by changing the packaging of products and working with platforms such as JD.com Inc (京東) to sell online.
Still, gearing toward the Chinese market might not yield immediate results as weak domestic demand was a key factor behind the country’s poorest economic growth in about 30 years last year.
The push inward comes from China’s top echelons, with Chinese Minister of Industry and Information Technology Miao Wei (苗圩) on Wednesday saying that China aims to “rapidly activate domestic demand” to make up for the external shortfall.
“Before the epidemic, some exporters were already trying to expand their domestic market share as part of their business strategy to diversify, in order to protect themselves better against risks,” Yang Shaohui (楊紹輝) of JD.com told reporters.
Kim Ng, managing director of kitchen gadgets producer Ko Fung Holdings Ltd (高峰) whose factories are in China, said he is producing 30 percent to 50 percent less than pre-virus levels, with almost no new orders between mid-March and last month.
He expects orders from the US — a major export market — to fall further and is preparing to take part in a trade fair in China to boost sales within the country.
What previously was just 5 percent of his sales could increase to half the business, he said.
Ng said he had already considered expanding domestic sales in China when the US imposed tariffs on Chinese goods at the start of their still-simmering trade dispute, which began two years ago.
“The pandemic has accelerated our plans,” he said. “It is a problem we have to solve eventually ... the US is now saying it might introduce more tariffs.”
However, not all exporters in China can readily tap the domestic market.
Jason Lee, chief executive officer of metal parts manufacturer Shanghai EverSkill M&E Co (上海鍇樸機電), is at a loss, as he simply does not see equivalent demand for his products at home.
“Europe has started lifting [lockdown] restrictions recently, and we’ll only know if this is a good or bad thing in a few weeks,” Lee said.
For now, Lam Cheong Leung, creative director of household products manufacturer Green & Associates, has full warehouse space to contend with.
Shipments to the US — which account for nearly half his production — have slowed, Lam said.
As a result he has cut production, canceled overtime and has just two-thirds of his 300 or so staff at work.
“If shipment delays last a year, how will our factory continue operations?” he asked.
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