Tuesday, May 11, 2010

Chinese exporters prefer exporting...

The South China Morning Post reports that China's Ministry of Commerce has largely failed in its efforts to convince exporters to sell to domestic retailers and wholesalers.

Challenges include small order quantities, unattractive payment terms and intellectual property theft.

Beijing has been experimenting with strategies to lessen the economy's reliance on exports. As part of that, some 8,000 large- and medium-sized domestic retailers were encouraged to attend the Canton Fair which closed last week.

Exporters claim that the domestic market is complicated, fragmented and loaded with risks. Dealing with overseas buyers results in (close to) risk-free payments and larger orders. Export order terms are typically 30% in advance and the remainder is paid by in cash or a letter of credit before the goods ship. In the domestic market, retailers pay 90 days after the goods arrive. Which would you prefer?

The full article is here (behind the South China Morning Post's payment wall).


Paul Woodward said...

Interesting piece Mark. It would seem that there is still a huge role to be played by Alibaba's domestic China business and its smaller competitors in smoothing the path for Chinese factories to feel comfortable selling within China.

Mark Cochrane said...

And the reverse may also be true: Alibaba and other online platforms have a role to play in "graduating" domestic suppliers into the seemingly more lucrative world of exporting. Alibaba has some 36 million registered users on its domestic Chinese-language site versus 11.5 million on its international, export-oriented platform. That international platform also generates more than 60% of Alibaba.com's revenues.