Massive Warehouse Clearance Amid Sharp Drop in China Exports... "Overcoming Crisis Through Domestic Demand"

[Asia Economy Beijing=Special Correspondent Park Sun-mi] As China's export economy in the first quarter struggles due to the spread of the novel coronavirus infection (COVID-19), there is a growing movement to fill the export 'gap' with domestic demand.

On the 14th, China’s Global Times reported that Chinese exporters facing difficulties due to COVID-19 are showing signs of focusing more on the domestic market. Degson, an industrial electrical connector manufacturer located in Ningbo, Zhejiang Province, restructured its production to focus on medical electronic product components, including ventilators with high demand, after export routes were blocked due to COVID-19 following the Lunar New Year holiday. This restructuring resulted in a 30% increase in new orders in the first quarter. Normally, the quarterly new order growth rate was only about 15%, so COVID-19 ironically became a turning point.

The movement of Chinese export companies turning toward the domestic market is expected to be greatly supported by various government measures to promote domestic consumption. The Chinese government is actively encouraging the issuance of consumption coupons to revitalize consumption hit by COVID-19 and is expanding plans for sales promotions using e-commerce companies as well as online exhibitions and fairs. Li Shijun, Director of Foreign Trade at the Ningbo Municipal Bureau of Commerce, told Global Times, "It is time for exporters to target the domestic market."

Global Times also reported that on- and offline events are being actively held to handle goods piled up at port terminals due to overseas order cancellations or contract breaches. Most products that could not be shipped overseas are released for domestic use. Chinese consumers gain the opportunity to purchase high-quality export-grade products at lower prices, which also improves their quality of life. Several internet-based companies, including the Chinese e-commerce platform Pinduoduo and the video platform TikTok, are also showing signs of participating in the government’s domestic consumption promotion campaign.

Alibaba, one of China’s leading e-commerce companies, recently announced the reactivation of the ‘Chunlei (春雷) Project’ supporting small and medium-sized enterprises within China after 11 years. The plan includes support in five areas: improving online business for import-export companies, developing the domestic market, building a digital industrial belt, supporting agriculture through smart networks, and providing financial services.

Domestically, there is growing anticipation that large-scale product discount events will be held soon as part of the government’s efforts to offset the impact of export sluggishness with domestic consumption. An industry insider explained, "Exporters will release large quantities of products that could not be shipped into the Chinese domestic market," adding, "Clothing products will be among the main items for major discount events."

However, some opinions suggest that exporters turning their attention to the domestic market is only a move to offset temporary losses and that it will be difficult to completely shift the overall direction of their business in the long term. Selling domestically requires more sophisticated brand building and exploration of sales channels, which may feel complicated for exporters who have been receiving orders, manufacturing products, and exporting them with the support of government import-export policies.

Meanwhile, amid the global trade decline caused by the COVID-19 pandemic, the outlook is that China’s foreign trade in the second quarter will also decline in double digits following the first quarter. This is because economic activities in the United States and the European Union (EU), China’s major export markets, are unlikely to normalize in the second quarter due to COVID-19.

UBS economist Zhang Ning estimated, "China’s exports from April to June will plunge 20% year-on-year due to recessions in the US, Europe, Japan, and some emerging countries." Larry Hu, an economist at Macquarie, also forecasted that China’s export growth rate in the second quarter will definitely fall further compared to the first quarter, with an annual decline rate of 13%.

This content was produced with the assistance of AI translation services.