China's inland provinces are starting to feel the pinch of the global economic downturn companies and officials said at the 20th China Harbin International Economy and Trade Fair.

Compared to those in the coastal regions, the impact had been delayed by four to five months in northeast Chinese provinces, especially in the construction industry, said Hou Zhang, board chairman of Heilongjiang Province Construction Group.

Business began to drop in February. Orders from developed countries have been canceled since then and it has been spreading to southeastern Asian countries and African countries, which hit our ambition to expand overseas, People’s Daily reported.

According to Zhang, the growth rate was supposed to be 100% last year but only reached 25%, and the expectation on this year's growth rate is only 35%.

Hou Zhang’s view was backed up by Yongqun Zhang, general manager of the State-owned Songjiang Plywood Factory in Heilongjiang, whose trade volume fell by 20% in May.

The plywood factory mainly sells products in China, which helped the company remain stable amid the downturn, the general manager said.

The domestic market is a big cake which everyone wants to have a bite of. More companies, especially the southern companies affected by the crisis, have turned to the cake so that each now has a lesser share, he said.

China's economy looks like falling dominoes, falling down from southern to northern provinces, he said.

A similar metaphor was offered by a local banker named Xiao Zhigang.

Like the winds, the crisis landed in China first on the Yangtze River Delta and the Pearl River Delta economic zones and later spread to southern regions, Xiao said.

The situation holds true in other inland provinces. Zhongjia Abrasives Company, from Yangquan City of north China's Shanxi Province, had been losing overseas clients during the crisis and it wanted to find new ones at the Harbin Trade Fair.

The crisis's impact grew larger in March and April for us, said Bin Yang, sales manager of the company whose exports make up 70% of its total business. It mainly exports abrasives to the United States, Pakistan, India, Malaysia and Egypt.

The company had increased the lower price products as the high price products could not be sold, Yang said.

The competition had become more furious so that our profit has been reduced to 10% from the previous 15%, Yang said, adding that he only expects a stable situation this year.

Other companies said China's 4-trillion yuan ($586 billion) stimulus plan was working and positive signs could be seen.

The domestic market and markets in Europe and Southeastern Asian countries had been more active, which is a positive signal, said Guangwei Liu, general manager of the Import and Export Trade Company, Harbin Bearing Group.

The company had enjoyed success amid the global downturn but things began to turn bad in 2009. Many overseas clients canceled orders, saying that they were overstocked, Liu said.

We analyzed it and found that it was the growing price of steel which drove our sales of bearings, which was not normal, and the crisis let us see its power this year, Liu said. It is time to practice winter swimming but not to hibernate, she said.

The companies had been keeping faith amid the downturn, and became even more active, said Haibin Guan, deputy general director of the Harbin Trade Fair.

A more positive attitude appeared among the companies amid the crisis, Guan said.

Statistics from the State Grid Corporation of China showed that the electricity consumption in a few of China's inland provincial-level regions, including Heilongjiang, Xinjiang and Tibet, had been increasing in May while decrease was recorded in the provinces of Shanxi and Qinghai, as well as Ningxia Hui Autonomous Region and Inner Mongolia Autonomous Region. Consumption also kept dropping in the coastal Jiangsu and Zhejiang Provinces.

However, the impact of the crisis had been limited for three reasons, Guan said.

Guan noted that China's northern companies focus more on the domestic market while southern companies are mainly exporters. Secondly, the stimulus plan was launched before the crisis hit the northern area. Thirdly, the initial recovery of the southern economy had brought new chances for the northern economy.

The 20th Harbin Trade Fair with 3,001 booths, 25% more than last year, had attracted 120,000 exhibitors and buyers from nearly 70 countries. The fair runs from June 15 to 19.

Egypt Pakistan India China