China tries peddling its wares in ... China?

Chinese exports fell by 26 percent in February so China is now hoping to find domestic buyers for goods once bound for American shopping malls.

Aly Song/Reuters
Stimulus: China hopes that new incentives can spur domestic spending. Above, shoppers at the Barbie flagship store’s March 6 opening in Shanghai.

Liu Dequan says he has had to alter the ornamental lamps his firm had fashioned for the US market. He’s changed the plugs to fit Chinese sockets.

“Since the financial crisis happened I have had no foreign business at all,” Mr. Liu laments. “I decided that I have to work on the domestic market no matter how difficult it is.”

He is not alone. Chinese exports are in free fall, according to government figures released Wednesday, dropping by 26 percent in February from a year earlier, after a 17.5 percent drop in January.

Liu is one of 30 or so Chinese manufacturers currently selling their export wares instead to Chinese consumers at a month-long fair in China’s Yansha shopping mall, the country’s largest.

Organized by the Beijing Department of Commerce, the sales drive is designed both to introduce ailing exporters to new markets and to encourage consumers to spend money on goods they may never have seen before.

It has been a hit with shoppers. The mall’s doors were mobbed well before opening Thursday morning, as security men with bullhorns tried to keep order among the hordes.

Whether this kind of event can really help put the pep back in the Chinese economy, however, is uncertain. The growth of China’s gross domestic product could be as low as 5 percent this year, some analysts say, down from 9 percent in 2008.

“I don’t think that in the short term domestic consumption can make up for the loss of exports,” says Xiang Songzuo, an independent economist. “Exports have fallen quickly and consumption will grow more slowly.”

There are some signs that increased consumption might cushion the blow, however. Auto sales surged 25 percent last month from a year earlier, in the wake of a 50 percent cut in the purchase tax on small vehicles that the government’s stimulus package introduced last November.

Nothing as large as a car is on offer at the Yansha mall; the temporary stalls set up in the corridors sell household items such as jewelry, water purifiers, clothes, hi-fi speakers, and photo frames.

Electric yogurtmakers have proved a particularly spectacular success. “We’ve sold 200 so far today,” says Zhang Hong, general manager of Rikon, after only an hour’s business Thursday, which saw her standing in front of a pile of cardboard cartons frantically handing out $14 models as a line of customers lengthened.

“We used to sell only in the US and Europe, but we’ve been affected by the crisis so we are switching our attention to the domestic market,” she added. Though her firm no longer enjoys the tax rebates that the government offers to encourage exports, Ms. Zhang says, the higher prices she can charge here keep profit margins up.

One happy customer was Liu Jingzhu, a middle-aged economics researcher at a government-run think tank. “Exports are very difficult at the moment so they are selling to local consumers,” she said. “Lucky for us.

“I couldn’t find this in China normally,” she added. “You seldom see export-quality goods on the shelves here.”
That seemed to explain the size of the crowds of shoppers who gathered in a curious crush around the stalls. “People think the quality of export goods is better,” says a young man selling glass ornaments who would give only his surname, Ma. “And they are right. We can’t put any lead in things we sell abroad, for example.”

At a nearby stall, salesmen sang the praises of robotic vacuum cleaners equipped with MP3 players or webcams. “We used to do 70 percent of our business with Europe and Southeast Asia,” says marketing manager Qian Xinxin. “We’ve suffered a lot from the financial crisis.

“It won’t be possible to make up for all our international losses, but we can compensate a little” through domestic sales, Ms. Qian says.

Several manufacturers said they were not especially looking forward to working in the Chinese market. They compared the relative ease of doing a few big deals with a foreign buyer with the complications of selling to many different retail outlets here that pose restocking problems and do not always pay their bills quickly. The risk of seeing their products copied and undercut is also greater in China, they say.

But many Chinese exporters don’t have much of a choice. Mr. Liu, the lamp and furniture maker, for example, thought he had a massive deal with a Los Angeles buyer whose chain of stores went bankrupt last year. “If I’d got that deal I would not be here today,” he says, dusting off an ornate enamel lamp stand.

Not all is lost, though. The Beijing Department of Commerce arranged the same sort of meetings for Liu with retailers in the capital as it has done for all the companies at the fair. Three stores have expressed interest in his goods, he says, and “if things go well I think I can make up my losses.

“Still,” he adds wistfully, “I am looking forward to an economic recovery in the US.”

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