The global financial crisis has started to weave its way into Yiwu (義烏), the world’s largest wholesale market for small consumer goods, but the city in east China still nurtures expansion plans.
With a population of just under 2 million people, Yiwu’s business revolves around a huge building of 62,000 stalls containing umbrellas, socks, toys, electronics, zips and other goods — all spread out over 4 million square meters.
“If you allocated three minutes per supplier during eight hours of daily business, you would need over a year to make your way round it [the market],” said Li Xuhang (李旭航), vice mayor of Yiwu city, at the heart of Zhejiang Province.
But despite a successful model of making products that are always in high demand, Yiwu is suffering, with business slowing “since the end of the first semester in 2008,” Li said.
The vice mayor puts this down to a 12 percent or 13 percent rise in labor costs, the appreciation of the yuan and an increase in the price of raw materials — problems exacerbated by the global downturn.
As a result, the city’s GDP grew 12 percent last year, higher than the 9 percent growth figure for the whole country, but still lower than the 15 percent or more increase Yiwu has achieved in recent years.
The city’s economic activity has also slumped, as shown by its annual fair in October.
Orders dropped 3.2 percent during the event, instead of increasing by the previous 10 percent to 15 percent, and the number of foreign visitors fell by more than 5 percent.
“In 2008, 55 percent of our goods were exported, against more than 60 percent the previous year,” said Ding Yufeng (丁雲峰), vice president of CCC (浙江中國小商品城集團), the group that manages Yiwu’s market, majority-owned by local authorities.
For some people, the crisis has had a serious impact.
“Business? What business? For months, we haven’t done any,” said a woman surnamed Liao, sitting in her shop filled to the brim with odds and ends, from key-rings to dog collars.
Another shopkeeper surnamed Wang moaned about the current state of affairs, looking up from an embroidery in her umbrella stall.
“My turnover must have dropped 20 [percent] to 30 percent since the second semester, but we hope that things will be better after the [Lunar] New Year,” she said.
A stroll along the market’s alleys in the morning sees few clients jostling for space and, after lunch, the place is almost deserted.
Some of the retailers even closed shop 10 to 12 days before the Lunar New Year holiday, which began last Monday.
“Normally, they worked until five days before the holiday,” said Yann Salaun, a young French entrepreneur who now lives in Yiwu.
But despite the slowdown, local authorities are planning a new extension to the market with the aim of reaching 5 million square meters next year.
“The moment is right. We already have part of the financing, so we are grabbing the opportunity,” Ding said.
For vice mayor Li, Yiwu is well positioned because it makes products in high demand.
“Rich, poor, everyone uses them. Before the crisis, consumers might have preferred luxury items, but now, there is the Chinese product,” he said.
Yiwu authorities said the city boasts the world’s five-biggest sock manufacturers and the largest zip factory.
“We are expecting a difficult first semester in 2009, but after that it’s going to improve, especially with the drop in oil prices,” Ding said.