Shifting Focus
Exportoriented enterprises are turning to domestic sales to weather impact of epidemic
In late April, the workshop of Huaibei Laibote Photo Frame Manufacturing Co. Ltd. hummed with the sound of machines from time to time as dozens of staff worked on the assembly lines. However, it was much quieter compared to March and April in previous years when workers had to work overtime to catch up on orders.
“Most of our orders were from Europe, the United States and Australia, and 98 percent of our products are exported to overseas markets. After the virus spread globally, the production of our company grounded to a halt,” said Zhang Defeng, head of Laibote.
As the domestic situation of epidemic improves, some businesses are feeling somewhat relieved and getting fully prepared to resume production and develop new markets. But most of China’s exportoriented enterprises had never thought that they will have to transition from managing the pressure of “orders in hand but no workers in workshop,” to the predicament of “workers in workshop but no orders in hand.”
According to figures released by the General Administration of Customs on April 14, in the first quarter of this year, China’s trade in goods was valued at 6.57 trillion yuan ($ 930.59 billion), a year- on- year decrease of 6.4 percent. Of the total, the value of exports dropped by 11.4 percent to 3.33 trillion yuan ($471.67 billion). A WTO report expects global trade to decrease anywhere between 13 percent and 32 percent this year. Facing the unprecedented pressure, China’s export-oriented enterprises are trying to find a way out, and some of them have shifted from export to domestic sales.
Not so simple
“About 80 percent of our products were exported, but now many of our clients have postponed or cancelled their orders,” said Chi Zhuxiang, head of Fujian Quanzhou Shunmei Group Co. Ltd., who is now facing the same shortage of overseas orders as Zhang.
A leading ceramic exporter in Dehua, a county famous for ceramics in Quanzhou, Fujian Province in Southeast China, Shunmei Group has exported its ceramic products to more than 100 countries in the world. But due to the impact of COVID-19 on foreign trade, Shunmei Group has turned to domestic online sales platforms. “During the epidemic period, we have tried live-streaming platforms for sales, and we didn’t expect so many customers, who have brought us a lot of profit,” Chi told Beijing Review.
After knowing about the difficulties faced by the trade enterprises due to a sharp drop in orders, the local government of Dehua has encouraged them to explore the domestic market via e-commerce and live-streaming platforms. Huang Wenjie, Mayor of Dehua County, is even acting as a presenter for live-streaming to promote ceramics of different local producers.
After some successful trials, Chi is now planning to use more live-streaming platforms to sell products meant for exports in the domestic market.
Many enterprises have opened up new sales channels via online platforms during the epidemic, but for most of the exportoriented enterprises, having a finger in the pie is not easy despite the huge potential of the domestic market. Zhang fully understands the situation.
“The demands of the overseas and domestic markets are different, so it is not easy for even a best-selling product in overseas markets to be accepted by domestic consumers. In addition, compared with the supply-to-order model of exports, domestic sales require higher warehouse costs and more working capital,” he said.
Recently, the Central Government has issued a series of policies to ensure stability of foreign trade. Measures such as encouraging financial institutions to increase credit to foreign trade enterprises, ensuring timely and full tax rebate, and setting up 46 new cross-border e-commerce comprehensive pilot areas have greatly helped China’s foreign trade sector overcome difficulties.
Export-oriented enterprises must also tackle a lot of problems before they can gain a foothold in the domestic market. For example, some of them are not familiar with the access conditions and rules in the domestic market, and it is difficult for them to obtain orders from domestic clients and set up complete sales channels within a short time. Intellectual property rights of some products belong to foreign clients, so the producers must first gain authorization before selling these products in the domestic market. And some of their brands
are not well-known in the domestic market.
While further exploring the domestic market, Laibote is also expecting the overseas market to recover at an early date. According to Zhang, the company has some products stored in overseas warehouses, and some orders can be delivered from May as the epidemic situation in some countries improves.
“As a kind of cultural product, photo frames store precious memories and moments of many people. We hope that after the epidemic comes to an end and life returns to normal in the whole world, the photo frames we produce will continue to be used by customers to store their precious memories,” said Zhang.
Antiepidemic production
In addition to turning to domestic sales, some export-oriented enterprises have chosen to switch to epidemic prevention materials, aiming at both supporting the world’s anti-epidemic campaign and turning the crisis into an opportunity.
On April 24, nearly 100 workers wearing protective suits were busy working inside the asepsis workshop of Huaibei Xinxing Huangyuan Garment Co. Ltd. in Huaibei, Anhui Province in east China. There they produced surgical masks with meltblown nonwoven fiber.
Early in February the company turned a garment workshop into an asepsis one.
“We are a producer of men’s casual wear, and 50 percent of our products, or 1 million suits, were exported to European and American countries every year,” Xiao Guochen, chairman of Xinxing Huangyuan, told Beijing Review.
In the early period of the outbreak in China, most of the company’s overseas orders were not affected, but in order to support the prevention and control efforts, Xiao soon decided to produce anti-epidemic materials in response to the call from the government.
As a garment producer, Xinxing Huangyuan has very experienced textile workers, which was helpful for the company to shift to the production of protective suits and masks. The challenge was to transform the workshops and apply for production license of medical devices.
Learning of the difficulty, the local government acted swiftly to offer a helping hand. “Time means everything during an epidemic. The government fully supported us in shifting production, and sent a special taskforce to give us one- on- one guidance on technologies, policies and rules,” said Xiao. “After confirming through strict examination that we were qualified, the market supervision bureau fast-tracked the issuance of the county’s first certificate for anti-epidemic materials to us.”
With the government’s help, Xinxing Huangyuan has transformed an ordinary workshop into an asepsis one. Brand new production lines of anti-epidemic materials were put into operation within 20 days, with the production capacity of 3,000 protective suits and 400,000 masks per day.
After the global spread of the pandemic in March, almost all of the garment export orders for Xinxing Huangyuan were cancelled. According to Xiao, at present half of the company’s production capacity is used for serving domestic garment demand, while the other half is dedicated to anti-epidemic materials for exports. The prospects of garment exports depend on the pandemic situation in foreign countries, and the industry is expected to face many difficulties in the short term.
“While pinning hopes on expanding domestic demand, we also need to take the initiative to find a way out and shoulder our social responsibilities,” Xiao said.