Foreign-funded companies refocus on the Chinese domestic market

DONGGUAN, Guangdong - Foreign-funded firms that were previously export-oriented sought to explore the booming domestic market at a recent fair to combat the aftermath of the global economic downturn.

They clinched 5,960 agreements or letters of intent - an 11 percent increase over last year - valued at 57.71 billion yuan ($8.9 billion) - a 7 percent increase - at the third annual Guangdong Foreign-invested Enterprises Commodities Fair in Dongguan, Guangdong province, according to the fair's organizer.

Nearly 1,000 foreign-funded enterprises engaged in manufacturing in Guangdong and 19 enterprises from the special administrative regions of Hong Kong and Macao, and provinces such as Hunan and Hainan, showed products ranging from home appliances, food and beverage and garments to toys.

The fair, launched in 2009, when China's export sector bore the brunt of the global economic downturn, has helped build experience in expanding domestic demand, optimizing trade structures and upgrading the manufacturing sector, said Yu Jianhua, assistant minister of commerce.

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"We have no choice but to switch (the market)," said Chen Hansheng of Dongguan Filluck Watch Co, attributing the necessity to the sluggish US and European markets and the ongoing appreciation of the yuan against the US dollarmaking their export products more expensive.

In its foray into the Chinese mainland market, the company is already reaping 20 percent of its net profit here, Chen said.

German Pool Group Co, a home appliance maker, is building up retail channels on the Chinese mainland, after starting wholesale selling to property developers in the country 10 years ago.

"We hope the mainland comes to account for about 30 percent of our business this year, from 10 percent last year," said Karen Chan, vice-president for marketing and business development, adding that the strong property sector is behind this expectation.

To boost retail, German Pool plans to open 10 showrooms on the mainland within three years and to eventually bring the number to 2,000.

To better cater to mainland consumers, export-oriented companies have been redesigning their products.

VTech Electronics Industrial (Shenzhen) Co, an electronic toy maker, launched its products specially for the mainland last year, with more educational functions, said Alice Wang, a representative of the firm at the fair.

Covering only first-tier mainland cities through agents before, VTech set up a subsidiary last year for mainland sales to cover other cities, encouraged by the strong purchasing power and changed spending attitude of the younger-generation parents.

The company projects its sales on the mainland will jump from about 10 million yuan last year to 30 million yuan this year, with annual double-digit growth in the coming years, Wang said.

When exploring the mainland market, export-oriented companies need to address issues such as building up sales channels, changing the largely low-end consumers' attitude and acquiring the necessary certificates, such as the China Compulsory Certification (3C) certificate for home appliances, according to the exhibitors.

Guangdong's authorities have been working to upgrade the export-oriented processing trade industry in the province, encouraging companies to sell to the domestic market.

About 33,000 companies are engaged in the processing trade in Guangdong, generating $446.08 billion in imports and exports last year, which accounted for 56.9 percent of the total imports and exports in the province and 38.5 percent of all processing trade enterprises in China.

Processing trade companies in Guangdong sold products worth 1,161.5 billion yuan to the domestic market last year, according to official statistics

The General Administration of Customs and the Guangdong authorities signed a memorandum of cooperation in May to build a demonstration area in the province for upgrading the processing trade industry.

With innovative customs regulations to be applied in the demonstration area, the cooperation is meant to encourage the development of strategic new industries, such as high-end equipment manufacturing, and to encourage processing trade enterprises in innovation and brand-building to move up the value chain, according to Sun Yibiao, vice-minister of the General Administration of Customs.

It is also aimed at increasing domestic sales of those enterprises, Sun said.