Yiwu is considered a bellwether for China's low-cost exports especially to emerging markets in South Asia and the Middle East. Gabriel Wildau / Reuters
Yiwu is considered a bellwether for China's low-cost exports especially to emerging markets in South Asia and the Middle East. Gabriel Wildau / Reuters

Winds of change warm Chinese trade



The shops go on and on, packed in beside corridors that bustle with buyers, sellers and even a few small children playing during the school holidays.

This is one of the vast commodities markets in Yiwu, a city two hours south-west of Shanghai that has become a hub for buying and selling everything from jewellery to plastic figurines, washing-up sponges to exercise books.

Citywide the number of wholesale shops is close to 70,000 and this does not seem surprising: it takes several minutes to drive the length of the main shopping area, which is said to be the world's biggest wholesale small commodities market.

According to Huang Yijun, 42, a businessman who runs a company selling low-energy lights, trading is "in the genes" of Yiwu's people.

"Before the opening up [of China], Yiwu was a small place, like a backwater village," he says, going on to describe how the city's residents travelled countrywide buying and selling goods before the city itself became a hub for trading.

While there are plenty of factories in the surrounding area, many of the goods in the markets come from Guangdong province in the south, giving the city a vast selection for buyers from the Arab world, South America and South Asia to choose from.

Trade between China and the Arab world, in particular, is booming. In the first nine months of last year, bilateral trade reached US$142.6 billion (Dh523.79bn), almost as much as for the whole of 2010, and Chinese officials want the figure to top $300bn by 2014.

Amir Morkos, from Egypt, visits regularly because, "It's easy because everything is in one place." Two decades ago, Mr Morkos' father would travel to Germany or Italy to source products to ship back home.

"You can customise any design - the colour, the costs, everything," says Mr Morkos, 28, who buys lamps, vases, porcelain and pictures. "I like it here but it's hard work. Everybody is working - there's no fun."

For all that China-Arab trade is growing, the city is not immune to the effects of the political strife that has hit parts of the Middle East.

Wang Kelu, the chairman of the chamber of commerce for Zhejiang province, which includes Yiwu, points out turmoil in Libya and Syria, both important destinations for Chinese goods, has hit business with those countries.

"In the last year or two years, overall commerce volume has decreased something like 20 per cent or 30 per cent," he says.

Similarly, the European financial crisis is making life tough for Yiwu companies that supply high-end products aimed at developed countries.

"Orders have declined quite noticeably since the crisis hit the European market. The customers push the prices to the limit so the profit margin is very low, less than 15 per cent or 10 per cent," says Zhang Jingfang, who manages a store for She Dai Mei, which makes jewellery.

There are hundreds of types of earrings on display in the company's small outlet, and the minimum order is, as is standard for many shops here, 10 dozen.

The wholesale price of about 7 yuan (Dh4) a pair is about one third of what they will retail for, putting She Dai Mei at the upper end of the jewellery market in Yiwu.

It takes about 10 to 15 days for the company to fulfil an order at its factory in the city, although shipping to Europe is another eight weeks. With euro-zone demand having fallen away, some producers are focusing on the home market and targeting China's growing middle class.

Jian Fei Toys, which manufactures dolls that dance and make music, is one such company. Dressed in everything from bright purple outfits to cowboy hats, the dolls sell for 20 to 30 yuan wholesale and the minimum order is 10,000. Annually the company makes about half a million dolls at its factory, which employs more than 100 people.

"We used to sell something like 70 per cent to foreign markets but now it seems more Chinese are buying these," says Zhu Miaomiao, who helped to found the company in 2008. "There's an urbanisation process, so people can afford these expensive dolls and the distribution system is improving."

Just as interest within China for many consumer goods is growing, so overall demand remains strong for the type of lower-value goods popular in developing markets, despite the turbulence in some Middle East nations. Among the firms with a healthy order book is Oubaina, a manufacturer of moderately priced ornamental animals, lampshades, and replica elephant tusks, based in Yiwu. Cheng Aike, a sales official at one of the company's stores in the commodities market, says "business is quite good".

"I have been here two years and business seems to be growing rather than declining," he says. "[The company's goods] appeal to Russians and Indians and Middle East countries more often."

An ornamental horse, about the size of a domestic cat and finished in silver, sells for about 280 yuan wholesale, although the retail price will usually be about three times as much. European markets, says Mr Cheng, 27, tend to prefer more expensive ornamental items.

Many companies servicing South America are also in a strong position. Haixing, a producer based in Guangdong of plastic household items such as beakers and washing up bowls, has this year been asked to send 200 containers of goods, each valued at about $15,000, to Chile.

"These 200 containers had just three kinds of items. South America has always been a stable business for us but this year it stands out with these huge sales," says Yan Xuxia, at the company's Yiwu wholesale outlet.

Yet amid the optimism, cautionary notes remain. Mr Morkos says demand for goods in his home country has "dropped down" as a result of the turmoil and political transition, and has yet to recover.

"I cannot say ... when it will be better because it's a long transition," he says.

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