Frontline research | How can the "two legs" of domestic and foreign trade stabilize? Integration | Domestic and Foreign Trade | Frontline

In January this year, China launched pilot projects for the integration of domestic and foreign trade in 9 regions including Beijing, Shanghai, and Zhejiang. The integration of domestic and foreign trade means that enterprises do not only rely on exports or domestic sales, but also make efforts in both domestic and international markets, in order to better serve the construction of a new development pattern of "dual circulation".

The "Two Legs" of Domestic Trade and Export Sales

How can we walk steadily?

Ningbo is one of the first pilot cities for the integration of domestic and foreign trade in China, with a total import and export volume exceeding 620 billion yuan in the first half of this year. As a major foreign trade city, one out of every four people in Ningbo is engaged in foreign trade related work. During the investigation, it was found that over 90% of large-scale industrial export enterprises in Ningbo have started domestic trade. How can the "two legs" of domestic and foreign trade stabilize? What difficulties do enterprises face? Can a breakthrough be achieved? Watch the reporter's report.

At this child safety seat production enterprise in Ningbo, the production workshop is simultaneously rushing to produce two orders from both the European and domestic markets.

The person in charge of the enterprise told reporters that it is now common to rush to produce domestic and foreign trade products of the same model in the same production workshop. But a few years ago, they were still a foreign trade enterprise that only engaged in exports, and were also designated partners for multiple international first tier brands in China.

Why should we also focus on the domestic market when we are doing well in the overseas market?

Chen Zhenchao, General Manager of Ningbo Huidun Infant and Child Safety Technology Co., Ltd.: Safety seats account for over 90% of global production in China, but our usage rate may be very low, possibly less than 10%. Therefore, we believe that once this domestic market erupts, it will be a very large market.

The enormous potential contained in the domestic market is an important reason for attracting enterprises, and the "two legged" approach of domestic and foreign trade has become a new goal for enterprises. But expanding the domestic market is not simply about exporting to domestic sales. The various standards of the product not only need to meet domestic sales requirements, but also need to be recognized by domestic consumers. Therefore, from the beginning, enterprises create domestic products based on the same line, same standard, and same quality - the "Three Similarities", which means that domestic and foreign products are produced on the same production line, according to the same standards, and achieve the same quality.

The head of the company said that although it has been established in the first few years, the domestic market has been in a loss making state, and it is investing the profits from export sales into the domestic market to build a brand. However, with the gradual recognition of "Three Same" products and the continuous release of the domestic market, enterprises have tasted the sweetness. Starting from 2022, while maintaining stable growth in the international market, the proportion of domestic sales by enterprises has exceeded 50%. In the first half of this year, with a decrease in overseas demand, the domestic market drove a year-on-year increase of about 40% in enterprise sales.

How is 100% "Three Same" product achieved?

The "two legs" of domestic and foreign trade in enterprises have led to a larger market, and behind this is the "three same" products that the enterprise has fully developed. So, how did this company achieve 100% "Three Similarities" in its domestic and foreign trade products?

The person in charge of the enterprise told reporters that producing "three identical" products with the same line, standard, and quality is not simply copying overseas products. Especially in terms of standards, there are many differences both domestically and internationally.

Xia Huanle, Director of R&D Department of Ningbo Huidun Infant and Child Safety Technology Co., Ltd.: Domestic and foreign standards are diverse and complex, and there are also significant differences in product inspection methods. Therefore, the most difficult way to achieve the "three same" for domestic and foreign trade products is to have the same standard.

Xia Huanle told reporters that their child safety seats are mainly sold in the European and domestic markets. To achieve simultaneous sales of the same product in these two markets, it is necessary to meet the admission standards of these two markets.

All products have taken on two marketing missions since their development. Not only that, in terms of product hardware, all raw materials are selected according to high standards, and some differences in technical standards are tackled by enterprises through independent research and development.

Xia Huanle, Director of R&D Department of Ningbo Huidun Infant and Child Safety Technology Co., Ltd.: For example, in terms of product testing requirements, the current domestic standards do not require side collision, but Europe requires side collision testing. And the dummies and sensors used in the two tests are also different; So, through independent research and development, we adopted a side collision avoidance buffer mechanism, breaking through the limitations of different test dummies and different conditions, so that our product can meet the requirements of both standards at the same time.

Xia Huanle said that from the moment a company decides to walk on two legs in domestic and foreign trade, it means taking the path of independent research and development. For this reason, the annual R&D investment of enterprises accounts for more than 6%, with a focus on independent research and development of product structure and research on basic technologies.

At present, the enterprise has obtained more than 150 authorized patents in terms of intellectual property and owns multiple invention patents. In addition to conducting research and development, the company has also participated in the formulation of multiple domestic and international standards.

Chen Zhenchao, General Manager of Ningbo Huidun Infant and Child Safety Technology Co., Ltd.: We first solved the problem of "same standard". "Homogeneity" and "same line" are not a problem anymore, because all spare parts of our domestic and foreign trade products are unified, and the production process is the same. In this way, we have achieved the "three same" throughout the entire line.

Not only are enterprises making efforts, but as one of the first pilot cities for domestic and foreign trade integration in China, Ningbo actively guides enterprises to research and develop, design, and produce according to the "Three Same" standards. Currently, more than 220 certified "Three Same" products have been produced. At the same time, Ningbo also supports the full process development of enterprise production technology transformation, marketing channel expansion, scientific and technological research and innovation, helping enterprises join the domestic circulation and achieve a "two legged" approach.

Pan Xiaofeng, Deputy Director of the Ningbo Municipal Bureau of Commerce: This year, we have arranged one billion yuan to support foreign trade enterprises in achieving a certain proportion of domestic sales scale. We provide support, and at the same time, we support foreign trade enterprises to carry out or build offline stores in relevant cities in China. We also provide support for the construction of offline stores.

How to solve the problem of "not daring to accept orders"?

Foreign trade enterprises are exploring the domestic market, and the issue of compliance with standards is gradually being improved. However, foreign trade enterprises also face other difficulties in exploring the domestic market. How can we help businesses solve these difficulties? What institutional breakthroughs have been made in the pilot program of integrating domestic and foreign trade? Let's continue to look at the journalist's investigation in Ningbo.

In Ningbo, all production lines of this technology-based enterprise are operating at full capacity, especially the orders in the domestic market have been scheduled until September. However, the company's manager told reporters that when the domestic orders being produced were found, they were not willing to accept them due to the large amount of money involved.

Shi Junbao, Deputy General Manager of Ningbo Maidu Zhilian Technology Co., Ltd.: For us, it is a mixed consideration.

Having large orders should be a good thing for businesses, but where do the worries come from? Shi Junbao told reporters that as a new enterprise entering the domestic market, they are still relatively unfamiliar with the domestic market, so risk control is their top concern.

Shi Junbao, Deputy General Manager of Ningbo Maidu Zhilian Technology Co., Ltd.: In terms of domestic business, compared to foreign trade, the payment cycle will be longer. We are concerned that once the goods are shipped, my funds will not be effectively guaranteed for payment, so we dare not take on larger domestic orders at once.

How to control risks is a common challenge faced by many foreign trade enterprises in Ningbo in expanding their domestic market.

As one of the first pilot projects for domestic and foreign trade integration, Ningbo is the first in the country to support enterprises in purchasing domestic trade credit insurance. In other words, domestic sales orders of enterprises can also have insurance to cover customer payment funds and credit protection, just like export orders.

Ye Youbing, Director of the Nansan County Business Department of China Export Credit Insurance Company Ningbo Branch: Once a company encounters a risk, we will promptly compensate it. Our current compensation ratio is about 90%, which means that all of its payments are guaranteed, so it can boldly accept large orders.

Taking the lead, innovating and expanding market financial security has solved the problem of foreign trade enterprises being hesitant to take orders when expanding into the domestic market. At present, in addition to orders in hand, enterprises are negotiating one after another with large domestic orders, and the proportion of the domestic market is rapidly increasing.

Xu Xiguang, Chairman of Ningbo Mabowell Group: The increase in our domestic sales proportion is quite significant, from around 10% last year to over 20% now. Especially this year, the stability of the overall sales situation is closely related to the expansion of the domestic market.

Chen Zhijun, Secretary of the Party Committee and General Manager of China Export Credit Insurance Corporation Ningbo Branch: In the first half of this year, we supported more than 140 local enterprises to expand into the domestic market. The total amount of domestic trade credit insurance coverage reached 7.4 billion yuan, helping enterprises effectively prevent credit risks and supporting the integrated development of domestic and foreign trade.

Benefiting from the integrated development of domestic and foreign trade, more and more foreign trade enterprises in Ningbo are vigorously expanding their domestic market. As of now, there are more than 4500 industrial and trade enterprises in Ningbo with export achievements, of which more than 91% have started domestic sales.