In eastern China, clothing factory owner Eno Qian faces significant challenges due to tariffs impacting her export business. She reports making a profit of 20 yuan ($2.74) for each item sold internationally, whereas domestic sales yield only a fraction of that. As a result, she believes transitioning to local sales is “not viable.”
Beijing has increasingly urged exporters to tap into the domestic market, especially after the U.S. imposed a steep 145% tariff on Chinese goods. However, manufacturers are wary of the obstacles involved in such a shift. Many export-dependent factories lament the poor domestic demand characterized by price wars, tight profit margins, and delays in payment from retailers.
Qian has chosen not to shift to local sales, citing low margins and cash flow risks due to late payments and high return rates from Chinese retailers. This situation underscores China’s heavy reliance on exports for growth and the urgent need for measures to boost consumer income. China’s commerce ministry recently announced initiatives aimed at supporting exporters in finding local buyers.
These include organized “matchmaking” events connecting manufacturers with retailers and e-commerce platforms. Local governments are also establishing task forces to address challenges faced by exporters. While e-commerce giant JD.com will create a significant fund to assist exporters, many, like Qian, seek more direct support, such as tax relief.
Both Qian and David Lian, an underwear factory manager, cite difficulties in penetrating the domestic market due to its price sensitivity and high promotional costs. As the Politburo meets to discuss these issues, economists are watching for any substantial steps to stimulate domestic demand, which is crucial for sustaining economic growth in China.