Survey: China makers tap domestic sales, keep an eye on exports

Posted: November 15, 2012

China exporters, cautious in their international dealings, will cultivate internal business in the year ahead as signs point to an even tougher 2013 export environment.

Forty-eight percent of respondents in Global Sources' survey of 194 manufacturers said they will increase domestic business in the next 12 months. Close to the same number will keep local sales at current levels, while only a handful will reduce dealings within China.

Nevertheless, domestic sales will not exceed international shipments at many surveyed suppliers, indicating makers are keeping the (export) faith. Outbound business in past months has gained, with October figures showing a roughly 12 percent increase YoY.

Wuxi Xinfda International Corp. is one such maker. The company expects China sales to increase by as much as 20 percent in 2013, although exports will continue to account for the bulk of earnings. Wuxi Xinfda, a manufacturer of sports balls, said there are more challenges to selling products domestically than abroad.

This sentiment is echoed by personal electronics maker Acever Electronics (Shenzhen) Co. Ltd. The supplier has identified design copying as a major hindrance to cultivating domestic sales. Piracy continues to be common in China due to minimal emphasis on R&D.

Acever is likewise wary that the lack of a mature credit system within the country will result in payment delays.

Other than these two issues, complex distribution channels and brand recognition are also challenges.

According to suppliers, partnerships with companies or retail chain stores with established distribution networks and deferred payment options are key in addressing these issues. Online retailers are also options, particularly for SMEs.

For certain industries, including solar panels, a supply glut is compounding expansion difficulties. Many top-tier makers are faced with decreased production, layoffs and even bankruptcy due to overcapacity. Exports have slowed due to anti-dumping measures in the US and reductions in funding for "green" technologies in Europe. Government efforts to boost domestic demand for solar panels, meanwhile, have not fully taken off due to grid constraints.

Despite these challenges, some companies have shifted their attention to the local market. For 11 percent of respondents, domestic sales have already displaced exports as their primary revenue source. Thirteen percent expect the same in the next two years.

Most respondents to this survey came from Guangdong province, China's primary export center. Many came from Zhejiang province. Companies based in the other provinces in the Yangtze River Delta were contacted as well.

Most of the 194 companies came from the electronics and home products industries. Makers of hardware and DIY, electronic components and fashion accessories were also surveyed.

SMEs represent more than three-fourths of interviewees. Many of these suppliers post between $1 million and $5 million every year in combined exports and domestic sales.