Opinion | Chinese companies must now focus on wooing consumers at home

When Chinese Premier Li Qiang addressed the World Economic Forum’s “Summer Davos” in Tianjin, China, his message was clear: China must become a “mega-sized” consumption powerhouse. Not just the world’s factory, but its market too. His words underlined Beijing’s intention to make household spending a core growth engine rather than a supplement to exports.

Faced with the harsh reality of steep tariffs and rising protectionism in the United States, many Chinese manufacturers are re-routing their exports from their biggest market to European and Southeastern Asian nations. This may offer short-term relief from the US-China trade war, but the long-term play? The domestic market.

But given the global trade fragmentation, diversification alone no longer offers certainty or scale. This was illustrated by data showing China’s manufacturing sector contracting for a third consecutive month in June.

The home market was never a nice-to-have, but it has become more of a strategic priority. The reasons are straightforward: US tariffs remain punishing, despite a trade truce agreed on to reduce levies recently as high as 145 per cent.

Some Chinese companies are looking to the European Union, with its 450 million consumers, to sidestep steep American tariffs. But the continent is increasingly erecting its own trade barriers, having slapped stiff duties on Chinese electric vehicles and placed anti-dumping levies on Chinese hardwood plywood.