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Export markets devastated, firms look to domestic salvation

(Xinhua)
Updated: 2009-03-23 13:41

For some Chinese trade companies reeling as their export markets wither in the financial crisis, the Seventh Cavalry has arrived in the shape of the home market.

"My company got 420,000 yuan ($61,500) of sales here, enough to pay another two-month's of wages for workers," said Zhao Jianmin, chairman of Yiyun Textile Co Ltd on the First Beijing Domestic and Foreign Trade Negotiation Fair Friday.

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The needlework company based in eastern China's Shandong province used to export 95 percent of its product to Europe before its sale slumped since November. In February, Zhao even considered filing for bankruptcy protection for his company.

"I found that Beijing consumers like our hand-made curtains, and my company started to produce them," said Zhao," I will also go around the country to look for agents who could help us in domestic market."

Another company at the fair was Beijing Richuang Electronic Appliance Co, Ltd, a company focusing on yoghurt machine export. It has sold more than 4,000 machines for more than 600,000 yuan ($88,000) during 12 days on the fair.

"Only when the sample machines on our booths were snapped up in hours, did I know our products are so welcomed domestically," smiled Zhang Hong, the general manager.

The company also signed a contract with Wumart Group, a leading supermarket in Beijing.

"The yoghurt machines have been sold in 70 branches of Wumart, with average sale volume topping 20,000 per week. It's the bestseller of our small appliances," said Fu Yu, Wumart's PR manager.

Fu said it is a good chance for Wumart to make deals with trade companies, because of their products' high quality, high-tech characters and low prices. For example, Richuang's yoghurt machines' export prices range from $20 to $100, while their domestic prices are 90 to 400 yuan ($13 to $59).

Walk with two legs

Overseas demands for "Made-in-China" have been diving since the economic crisis spread to every corner of the global market in late 2008. According to the General Administration of Customs, China's export in February plunged 25.7 percent year-on-year, marking a downtrend for four successive months.

"Under the current pressure, more Chinese trade enterprises will learn to 'walk with two legs' -- domestic and foreign markets, and become more risk-resistant," said Mei Xinyu, a researcher with the Chinese Academy of International Trade and Economic Cooperation under the Ministry of Commerce.

Mingle Sportswear Co, Ltd in Quanzhou, a leading sportswear producer in eastern China's Fujian province, used to export most of its sports suits and shoes. However, the company's present hub is the domestic market.

Guo Hui, Mingle's marketing manager, said the company will invest 20 million yuan ($3 million) in domestic marketing and sales network building. Up to now, the company has more than 1,900 stores or end-customer outlets across the country, and 90 percent of its products go domestic.

Some trade enterprises have already begun to develop new products for the domestic market, among which is Longpeng Group in Fujian, which specialized in pottery.

After its sales fell 20 million yuan ($3 million) in 2008, the company invested several million yuan to research on art pottery,for which there is a domestic demand. Until now, the new product -- white, glazed, art pottery has won sales of 50,000 yuan ($7,300) in the domestic market.

"Although a small amount, this is our first step to win domestically," said Chen.

Picture not entirely rosy

However, the newcomers to the domestic market may also take risks in "following steps". According to Chen, his company lacks the necessary experience in producing and managing for the domestic market.

"Taking stock for example, we used to have 'zero stock' because we produce for orders. But now we must manage our stock according to sales. This is really hard to handle with," Chen said.

Zhao Yanmin also told the reporter that the top priority of his company is to build domestic brand awareness of the products," but this will take us at least five years".

To help Chinese trade enterprises turn to the domestic market more easily, China has issued a series of new policies. Earlier this month the interest on deferred customs duty of bonded processing goods for domestic market was lowered from 5.31 percent to 0.36 percent.

This indicates that, if a trade enterprise's income tax payable is 1 million yuan, and the interest period is one year, its deferred customs duty will come down from about 54,000 yuan to 4,000 yuan ($7,900 to $586).

"With more capital to operate, trade businesses will be more confident in opening up the domestic market," said Guo Hui.

Export-oriented enterprises may face many difficulties in domestic markets, such as debt-collection, brand-building, and developing new distribution channels, said Mei. "It may be very tough at the beginning, but later on the trade enterprises will find heading for the domestic market is the best way out of the current dead end."