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Chinese Economy Experiencing Market Shift

China has achieved record economic growth making inexpensive products, and exporting them to foreign countries. Now, 30 years after the launch of economic reforms, there is a shift in policy toward the domestic market.

Chinese officials are trying to move the manufacturing hub of Shenzhen away from being the world's factory floor, and into hi-tech innovation.

They would once have been Christmas presents destined for European or American children.
But because of the global economic slowdown, teddy bears manufactored will now be sold on the domestic market in China.

PP Bear Toy Company Director Hu Lantian says she can no longer rely on foreign customers.
"Of course, many factories will be affected, including us, because many people have less money in their pockets during this recession and consumption is down, but I think in the long run, it could turn out to be a good thing," she said.

Hu sees the global slowdown as a chance to boost PP Bear's local market share.

The central government says it wants to increase domestic consumption to take some of the pressure off its export-dependent economy. It also wants to attract more high tech business to its manufacturing regions -- such as in Shenzen.

Shenzhen official Zhuang Hengchun welcomes the shift. "In the past Shenzhen was described as a giant factory. But now and into the future, we are changing Shenzhen from manufacturing to innovation," Hengchun said. "We are trying to improve ourselves."

It's a move similar to what happened in Japan in the 1970s and South Korea in the 80s, turning those industrializing nations into Asian economic powerhouses. But economists say in China's case the central government needs to ensure that the nation's wealth is spread around more evenly to boost confidence.

"If you look into the current income distribution, you can find the share of the household (income) has declined, Zhuang Jian said. Jian is a senior economist at the Asian Development Bank. "While the share of the government and enterprise income is going up," Jian added.

Household savings rates are around 30 percent of the family income here. In recent years, authorities have been trying to convince people to spend more of their savings as a way to boost domestic consumption. But this could be an ever harder sell in this time of economic uncertainty.