By Trefor Moss

YIWU, China -- Chinese makers of goods for export are seeking to turn inwards and sell domestically, a pivot considered key to making the world's second-largest economy more self-sufficient.

In recent weeks, Chinese President Xi Jinping has called for the country to embrace what he calls domestic circulation -- a policy designed to bolster local supply chains and encourage domestic consumption to make China more resilient to future commercial or geopolitical disruption, such as the coronavirus pandemic and the U.S.-China trade war.

While China's exports have bounced back after the pandemic, the benefits have yet to wash through places such as this eastern China export hub, where struggling merchants say foreign orders remain depleted by the coronavirus.

Reorienting China's formidable export machine to sell more domestically is easier said than done, say merchants in Yiwu, a city of 1.2 million people whose Yiwu International Trade City, a vast emporium of more than 75,000 wholesale stores, contributed about 2% of China's $2.5 trillion in exports last year.

Many of the products made here, such as Christmas decorations and other low-cost, labor-intensive commodities, simply aren't needed domestically in significant quantities. Only a small percentage of China's 1.4 billion people are openly Christian, according to the U.S. human-rights group Freedom House.

Zhang Jiying, whose company produces umbrellas primarily for export, is keen to develop Chinese markets as a hedge against future export shocks. But she acknowledges that going local will be slow and complex.

"We've spent decades learning how to operate smoothly in overseas markets," said Ms. Zhang, hinting at the enormity of trying to replicate those relationships back home. "Shifting to the domestic market won't be easy. The journey will be long."

After a tough start to the year in which exports fell year-over-year in the first half of 2020, China's exports improved in July and August.

China's biggest export categories -- electronics and high-tech products -- held up well, thanks to strong demand from industrial and institutional customers, as well as from people in lockdown buying household appliances or home electronics, economists say. Electronics exports were down roughly 2% to about $665 billion in the first half of the year.

But exports of many other commodities suffered: Toys were down 9% in the same period, ceramics fell 13%, and clothing dropped 17%.

Yiwu, which is 180 miles southwest of Shanghai, made its name producing these kinds of basic goods. From stuffed toys to plastic fruit, padlocks to fishing tackle, toupees to hacksaws, there is a Yiwu company that makes the items for the global marketplace.

The pandemic has now challenged the city's business model like never before. Thousands of foreign buyers used to visit the International Trade City every year to handpick products, but travel bans have prevented them from coming. Repeat orders and online sales have kept Yiwu's businesses alive, but there has been a slump in demand from Western consumers.

The challenge for exporters today is that many of them don't make goods that Chinese consumers want.

At one Yiwu store selling religious ornaments, ranging from figurines of Christ to gold-framed pictures of angels and saints, owner Cathy Yu said her orders, which mostly come from the U.S., were down 50% from last year.

Liu Jufang, who makes and sells plastic Christmas trees, said foreign orders only started arriving in July of this year, two months later than a typical year. Demand is picking up, but "it's too late for us to rush production to take all the orders," Ms. Liu said. This year's sales are on course to be down by one-fifth.

"Yiwu's challenge is that the domestic market doesn't have the stomach to consume all these products," said Dan Wang, chief economist at Hang Seng Bank China. "They're not really suitable for domestic use."

Even getting products that Chinese people do want into domestic circulation will take time since Yiwu's merchants lack local distribution connections, according to Andrew Batson, director of China research for Gavekal, a Hong Kong-based research firm. "Putting a product page on Amazon is a lot easier than getting your stuff on Chinese grocery shelves," he said.

There is potential to sell more domestically, provided ordinary consumers can be persuaded to open their wallets. China's total household consumption in 2018 was $5.4 trillion, according to the World Bank. That was three times higher than the 2008 level but still far behind the U.S.'s $14.6 trillion in 2018. While consumption as a share of gross domestic product has risen over time in the U.S., reaching 68% in 2018, China's has steadily declined to just 39%.

Ms. Zhang, whose Zhejiang Xingbao Umbrella Co. produces more than 3,000 types of umbrellas in styles tailored to scores of global markets, including China, is one merchant counting on domestic consumers to pick up some of the slack.

Sales have recovered somewhat from the worst of the pandemic, Ms. Zhang says, yet they are still down by one-third, prompting her to try rebalancing operations so that half of her sales come from domestic buyers.

Until now, domestic buyers accounted for one-fifth of the company's two million yearly orders.

The growth of e-commerce platforms in China has made it easier to reach new local customers through her smartphone, Ms. Zhang said, and she was devoting time to traveling around the country to meet prospective buyers -- just as she once toured European cities for the same purpose.

Ms. Zhang estimated that it might take three years for domestic sales to draw even with exports, though she was quick to add that exports will always remain critical to her business and to the Chinese economy.

"The world still needs 'Made in China' goods," she said.

--Yin Yijun contributed to this article.

Write to Trefor Moss at Trefor.Moss@wsj.com