Domestic market key for future

BEIJING - With exports sagging in the face of the global debt crisis, China's manufacturers should look to cash in on domestic demand, said the deputy minister of commerce.

"The growing domestic consumption market is turning into a platform where local companies could expand market share and enhance competitiveness globally," Wang Chao said at the Future of China and the World Trade Organization forum in Beijing on Friday.

"China is becoming one of the most important parts of the world market thanks to its growing economic scale," he said.

China's exports in August pulled back from a record high and were outperformed by imports in annual growth.

The nation's trade surplus last month dropped sharply to $17.8 billion, down 43 percent from July, the first time it had narrowed in six months.

Wang's remarks come as the European debt woes that involved Greece, Portugal and Ireland have spread to larger economies such as Spain and Italy, which economists believe will hurt the Chinese exports.

Additionally, increasing labor and raw material costs, and the rising yuan, are putting the squeeze on exporters.

"Although exports will continue to grow, the prospects are not optimistic over the next one to two years," said Wang Tao, head of China economic research at UBS Securities.

"Developing the domestic market is a good alternative and will be a must-do for Chinese manufacturers in the long-term," she said.

In its 12th Five-Year Plan (2011-2015), the Chinese government pledged to expand domestic consumption by raising individual incomes and improving social welfare.

"China's economy relies heavily on manufacturing and exports, resulting in over-investment and excessive capacity in certain industries. Achieving a better balance between external and domestic demand is a big challenge for China in the next decade," Pascal Lamy, director-general of the WTO, said in an article for the forum.

Yet exporters have already been looking at local markets.

"We want to shift to promote sales at home," said Chen Xi, manager of Wenzhou Dongyi Shoes, a mid-scale exporter which experienced decreasing overseas demand over the last few months.

China is now the largest exporter and the second largest importer worldwide. The nation is the largest developing nation - and the second largest worldwide after the United States - in absorbing foreign direct investment.

"Since China's entry into the WTO, China's economy has made remarkable achievements and the nation has also made a sizable contribution to the world economy," Wang said.

The Chinese government is also working on measures to boost domestic sales of goods originally produced for exports.

"We also welcome foreign companies tapping the domestic market," said Wang at the forum, which was held to commemorate the 10th anniversary of China's WTO accession.

Li Jiabao contributed to this story.