Measures to boost domestic sales

BEIJING – Measures are being drafted to promote domestic sales of goods originally produced for export, a trade official said.

The measures, due in September, coincide with a slowdown in export growth and an upturn in domestic consumption.

“They will include simplifying the approval process for domestic sales, establishing convenient financing, expanding sales channels and enhancing brand image,” said Chen Linhui, vice-chief of the processing trade division at the Department of Foreign Trade and Economic Cooperation in Guangdong province.

Due to the rising cost of labor, yuan appreciation and shrinking overseas demand, China’s manufacturers are finding it harder than ever to sell overseas.

Year-on-year export growth declined monthly during the first half of 2011, dropping to 17.9 percent in June from 37.7 percent in January. Trade experts and government officials said the slowdown will continue in the coming months.

To hedge against the risk of falling international sales, “China is drawing up measures to boost the sale of export-oriented goods domestically”, Chen said.

The measures will especially benefit companies in the processing trade. Companies in this sector import some or all of the component parts and then assemble the product for export.

The processing trade has been a major factor in the rapid growth of China’s exports over the past three decades.

In 2010, exports in this category accounted for 47 percent of the nation’s total exports. There are more than 100,000 companies in the processing trade nationally.

But declining growth over the first six months of the year has hit China’s processing trade exports as demand from major trade partners shrinks due to the slow global recovery.

Processing trade exports from January to June grew by 17.5 percent year-on-year, down from 32.9 percent during the same period last year. Growth for general trade exports, over the same period, was 30.4 percent.

“The measures will lessen risks from decreasing global demand by boosting domestic consumption,” Zhou Shijian, senior trade expert from Tsinghua University, said.

“Rising domestic consumption will also help reduce the trade surplus.”

As part of its 12th Five-Year Plan (2011-2015), the government pledged to raise disposable income per capita for rural and urban residents by 7 percent annually and stimulate domestic consumption.

China’s trade surplus has been rising since February and experts predict that the surplus will widen in the coming months.

Companies welcomed the proposed measures. Over the last few months, Wenzhou Dongyi Shoes Co Ltd, a mid-scale exporter, has experienced decreasing overseas demand.

“We want to shift to promote sales at home, but procedures are complicated and it’s too difficult and expensive for a newcomer to develop a brand and sales network in China,” Chen Xi, manager of Dongyi Shoes, said.

China has no restrictions on the sales of export-oriented goods on the mainland, but complicated procedures and the comparatively high cost involved have dampened the confidence of many exporters, experts said.

“The current situation makes it difficult to sell export-oriented goods domestically. Such exports are usually tailored for overseas markets. Finding the right buyers is a problem, and tax adds to the high cost,” said Dong Yubin, from the Department of Mechanic, Electronic and Hi-tech Industry at the Ministry of Commerce.

Chen Linhui agreed. “Many exporters in Guangdong province want to shift their sales strategy to the domestic market, but there are a number of obstacles in their way such as sales channels, financing and tax,” he said. “These proposed measures will probably address those concerns.”

One company has already made the switch from focusing on exports to domestic sales. Shanghai Jiuding Clock Co Ltd, a high-end manufacturer, said preferential policies are important for exporters.

China Daily

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