The trade war between the United States and China continues, leading to Chinese foreign trade enterprises losing American orders. In order to alleviate inventory pressure, they have had to shift towards domestic sales. During the recent May Day holiday, residents of Shanghai had the opportunity to purchase discounted foreign trade goods right at their doorstep. However, analysts believe that the shift from exports to domestic sales by foreign trade enterprises will have a negative impact on the Chinese economy.
Currently, the high tariffs imposed by the United States and China have essentially halted trade between the two countries. Chinese foreign trade businesses are forced to resort to shifting towards domestic sales to alleviate inventory pressure. During the May Day holiday, many foreign trade enterprises in Shanghai set up in major retail stores. According to reports by Shangguan News, on May 4th, they visited various stores such as the first food store in Shanghai, Global Harbor, and Yonghui Supermarket, and found a significant number of products that had shifted from exports to domestic sales. These products were priced lower and attracted the attention of residents.
The round and chubby “Dundun Cup” is made of high borosilicate glass, capable of withstanding extremely high and low temperatures. The stainless steel French press pot has smooth lines and is finely crafted, even high-grade hotels overseas use it. Awarded the German Red Dot Design Award, the thermos cup… at the first food store on Nanjing Road pedestrian street, the newly renovated “Selode” counter displayed nearly thirty products, all foreign trade goods that had shifted to domestic sales.
Cao Shuang, the head of the domestic marketing department of Selode, mentioned that in these days, both young consumers were attracted to the cuteness of the Dundun Cup and elderly residents were purchasing products like thermos cups and pots.
A citizen named Zhang purchased an item at the event at a discounted price. She said, “The price is quite reasonable. I checked online, and the brand Moka pots usually cost three to four hundred yuan each, with smaller capacities.”
Cao Shuang stated that after these days of sales, the company would adjust the product structure and gradually increase popular and new products, bringing more internationally award-winning products to domestic consumers. Meanwhile, Liang Longjun, the store manager of the Nan Dong store at the first food store, disclosed that the store was currently in communication with several foreign trade enterprises and planned to introduce many quality foreign trade products, including daily necessities and food items, after the May Day holiday.
The report mentioned that the high aesthetics and quality of foreign trade products have become the biggest advantage in attracting domestic consumers to make purchases.
A consumer named Mr. Li, born in the 1990s, who lives nearby, often cooks at home and came to the supermarket during the holiday to replenish his kitchen supplies. After careful comparison and selection, he ultimately purchased the most expensive item, the extra virgin olive oil canned tuna: “I have always wanted to make a tuna sandwich, but it’s hard to judge the quality of canned tuna online. This product in the supermarket seems more reliable.”
The export product exhibition held at the Shanghai Global Harbor before the May Day holiday offered a wide range of products. The person in charge of the booth stated, “We are a foreign trade women’s shoe factory established in 2004, located in Qingpu District, specializing in high-end women’s shoes for the European and American markets.” Affected by tariffs, the factory had accumulated a large inventory of women’s shoes that couldn’t be shipped, so they brought over a hundred styles this time, aiming to expand domestic sales channels to improve the company’s situation.
The prices of these women’s shoes at the event ranged from 58 yuan to 239 yuan, comprising mostly seasonal sandals, flats, and even off-season high-top shoes.
Another foreign trade company displayed various styles of straw-weaved shoes, with staff mentioning that they were subcontracted by the American leisure shoe brand Soludos. “This brand is popular in the European and American markets, but it’s actually produced in a factory in Zhejiang. The official website sells them for a few hundred dollars. We are now selling them at around one to two hundred yuan per pair mainly to clear out our inventory.”
Jiangsu Huateng Personal Care Products Co., Ltd was one of the first foreign trade enterprises to collaborate with Yonghui Supermarket in Shanghai. Previously, they had been a long-term supplier to Walmart in the United States. Mu Longsheng, the head of the company, mentioned that normally at this time of year, they would have already finalized orders for the second quarter with American customers, but progress this year is almost non-existent. Consequently, Huateng’s toothbrush travel sets, dental floss, and interdental brushes have entered supermarkets in Shanghai.
An article in the Asian Times on May 5th titled “China’s Economy is on the Brink of a Spiral of Monetary Tightening” mentioned that shifting exported products to the domestic market with significant discounts may seem sensible in the short term, but in the long run, it will weaken pricing power across industries, diminish profitability, and sow the seeds for cost-cutting measures in the future. This shift has exacerbated the issues it was intended to solve.
The article stated that the Chinese Communist Party has always positioned the domestic market as a “pressure relief valve” for the manufacturing industry; however, the influx of export-grade inventory has further intensified domestic excess capacity, leading to deeper monetary tightening that is affecting the entire economy.