Chinese ecommerce firms are helping exporters to tap into the local market, as the US/China trade war escalates. Both countries have imposed high tariffs on each other’s imported goods.
JD.com, China’s largest e-commerce company announced Friday that it would set up a fund of 200 billion yuan (about $27.35 billion), to assist domestic exporters in reorienting their business to the local market. The conflict has been a heavy burden on Chinese manufacturers.
Beijing has retaliated to Washington’s recent tariff increases by increasing its own duties against US imports on Friday.
The escalation was a result of President Donald Trump increasing tariffs to 145% on Chinese products, which is the highest rate ever.
JD.com plans to send staff to Chinese companies that deal with foreign trade to help them source high-quality goods.
This company also promises to create a section dedicated to these products on their platform, and to use its marketing resources in order to increase the visibility of local goods among consumers.
Freshippo, the platform of Alibaba for exporters will have its own special area
Freshippo supermarket chain, locally known as Hema by Alibaba, also announced measures similar to those taken in support of Chinese exporters who are caught up in the middlefires of the current trade war.
Retailer said that it will create a special zone exclusively on its platform for export-focused businesses.
Freshippo has also promised to streamline the registration for such businesses, and to grant them access its warehouse infrastructure in order to speed up their entry on the domestic market.
These programmes can help to offset the loss of overseas demand. However, in a sluggish economy there will be fierce competition for exporters.
The domestic demand is struggling to absorb excess supply
China’s attempts to redirect its export engines towards domestic consumers is hindered because of persistently low spending in China.
The latest data, released on Thursday, showed a further decline in the consumer price index. This highlights Beijing’s challenges in stimulating demand.
Derek Scissors is a senior fellow with the American Enterprise Institute. He warned that “the Chinese domestic market cannot absorb current supply and much less any additional amount.”
He said that Beijing could resort to old tactics, such as making concessions to US companies, selling surplus products to other countries or subsidising inefficient firms.
Goldman Sachs, on Thursday, cut its estimate for China’s growth in the GDP to just 4%. It cited the dual pressures from global economic downturns as well as the intensifying trade dispute with the United States.
Goldman analysts believe that exports to US represent roughly 3% (or 10-20 million) of China’s total GDP. This increases the stakes in Beijing.
Beijing wants to increase its market by strengthening ties with non US partners
The Chinese Ministry of Commerce announced this week it has convened business groups to discuss ways of boosting the domestic market.
In the next few days, new incentives, such as expanded rebates under an existing scheme of trade-in for appliances, are likely to be announced by policymakers.
Chinese firms are shifting more and more their attention to international markets.
For example, textile firms are shifting production from Southeast Asia to other parts of the world.
In a CNBC article, Zhao, from Green Willow Textile, said: “This year we will be developing new customers in Southeast Asia and Latin America as well as the Middle East and Europe in order to decrease our dependence on the US Market.”
Next week, Chinese President Xi Jinping will visit Vietnam, Malaysia and Cambodia in an effort to strengthen regional economic ties.
According to Chinese data, trade with Southeast Asia increased since 2019. It is now China’s biggest trading partner. The European Union, the US and Canada are the next two.
As new developments unfold, this post JD.com and Freshippo support Chinese exporters struggling to tap the domestic market during US-China Tariff War may be updated.
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