Yiwu: the Source of Transnational Trade Routes with the Islamic World

seviece Yiwu Market 179 Views Comments Off on Yiwu: the Source of Transnational Trade Routes with the Islamic World

hird, the internationalization of Yiwu’s specialized market has resulted from a strategy of constantly searching for new product outlets. Creating the city-market of Yiwu also meant that its promoters needed to find new buyers and intermediary markets for the products on display in its thousands of stalls. The quantity of products sold should thus offset weak profits according to the economic principle that Lin (2007) summarizes as: “If I earn 10 cents per piece, I can sell only 10 pieces per day, that’s 10 euros; if I only earn 1 cent per piece, I can sell a thousand pieces and make 100 euros.” This strategy imposes the need to continually expand the market for selling products to regional and national scales, since competition over the lowest price occurs among industries in the same specialized market and between the markets themselves. However, in the absence of a higher-level regulatory body to organize production and flows in the domestic market, SMEs have engaged in an intense price war, often at the expense of quality and innovation, resulting in Yiwu being stigmatized as the capital of counterfeiting in China (United States Congress 2006). Chow (2003) has estimated that “at least 90% of the products sold in the China Small Commodities market are either counterfeit or infringing products.”

10Since these markets are managed by the CSCG, which pays 26% of municipal revenues, the entire local economy is closely involved with these illegal activities. In addition, the city has excellent connections with similar markets in Argentina, Paraguay, Mexico and Thailand. As its prices are some of the most competitive, people come from all over the world, both those who are solidly established in transnational trade and those who are trying to make their fortune in the many businesses that result from this economy.

11The emergence of Yiwu as a global wholesale market is therefore a strategy orchestrated locally but endorsed by the upper decision-making echelons of public and private operators. They are trying to break into new markets in Zhejiang then in China and in the world, thanks to the town’s position in the niche market of small commodities and its dubious reputation as a center for manufacturing and distributing counterfeit products. During the 1980s, this resulted in the rapid consolidation of the Zhejiang region’s industrial landscape, with its 54.4 million inhabitants in 2014 and a GDP per capita of € 7,500, ranking the region fourth nationally. During the 1990s, the CSCG as well as Yiwu’s manufacturers, intermediaries, and traders in other provinces of China sold products in existing markets and created new sales outlets, whether through formal agreements or without them, throughout China. In the mid-2000s, Yiwu’s goods were sold in fifty markets, and in forty of them, at least half of the goods sold there come from Yiwu (Ding 2006, 2014). These markets were concentrated primarily in the ports for passengers and goods destined for South Korea, Yiwu’s fourth-largest trading partner in 2002; in the neighboring Zhejiang region; and in the landed border areas of the PRC.

12The growth of cross-border trade triggered a progressive internationalization of Yiwu, which increased in the 2000s. Today 55% of exports are destined for markets worldwide according to the Yiwu Municipality. The main destinations are not only neighboring states of China (Table 1), but starting in 2002 goods were also oriented towards emerging markets in Eastern Europe and the Persian Gulf.

13A combination of policy decisions taken at various levels and economic and geopolitical changes on a global scale positioned Yiwu at the heart of transnational trade networks linking Islamic countries.

14The post-September 11, 2001 context was an important step in China being viewed as a usual supply source for Muslim merchants who had previously gone to markets in North America, Europe and the Persian Gulf. However, the PRC’s exports towards the Arab and Muslim worlds had been increasing significantly since the late 1980s, and geopolitical conditions played an important role. The events of Tiananmen Square (1989) and the sanctions imposed by the European Union and the United States against China led the Beijing authorities, between 1989 and 1992, to explore new markets for its products (particularly weapons) at competitive prices and to sign contracts in the construction industry. The market was so promising that in 1990, Saudi Arabia broke off diplomatic and trade relations with Taiwan in order to sign several cooperation agreements with China (Gladney 1994), and Cairo importers were canvassed by the Chinese Chamber of Commerce in Egypt, inviting them to visit the industrial region of the Pearl River Delta (author’s interview in Cairo, July 2007). The 20 million Chinese Muslims (Hui and Uighur) then played a decisive role in the budding relationships between the People’s Republic and countries with a predominantly Muslim population (Gladney 1994).

15A major outlet for Yiwu exports then opened up towards the vast consumer market of the Middle East and North Africa (MENA), who were in search of inexpensive products. During the 2000s, exports from the PRC to MENA increased considerably with the growth in demand for consumer goods caused by the boom in oil prices. In 2005, Sino-Arab trade amounted to US$51.2 billion, almost ten times that of 1995. It had grown from US $133 billion in 2008 (Donghong 2011) to US$200 billion in 2011, the year of the Arab Spring. Two countries in the region, the United Arab Emirates and Saudi Arabia, were pioneer partners and have been among Yiwu’s top ten importers since 2002. In 2011, there were six countries from that region in Yiwu’s top ten including Iran, Egypt, Iraq and Algeria. The role of exchange platforms such as Dubai and Jeddah disappeared gradually in favor of direct relations between supply sources and consumer outlets.

16Further west from the Persian Gulf, a network run by mainly Arab traders arose on the shores of the Mediterranean. A chronology of North Africans’ travels to various marketplaces can now be sketched out. In the 1980s, many traders bought their goods in Marseilles, the main port for the former French colonies in North Africa, and in the port cities of neighboring states (Barcelona, Genoa). This gave rise to the figure of the trabendiste loaded with bags, an Algerian expression derived from the Spanish term contrabando (smuggling) designating someone who transports merchandise without declaring it to Customs (Peraldi 2007, Tarrius 2000). In the early 1990s, the destinations diversified with denser flows towards Istanbul where North Africans encountered people from the former Soviet bloc, and towards the Middle East and the Persian Gulf where they encountered people from Asia and sub-Saharan Africa, notably trader-pilgrims (Bennafla 2002). They also travelled to Southeast Asia, including Bangkok (Marchal 2007). The Asian financial crisis of 1997, the handover of Hong Kong in 1999, and the accession of the People’s Republic of China to the WTO in 2001 changed the center of gravity of these exchanges. Although traders continued to buy goods in some of these places, many of them entered China in stages after a first trip to Hong Kong to buy Chinese products, then going directly into the mainland through Guangzhou, and finally to Yiwu (Belguidoum and Pliez 2012), whose reputation for providing direct access to small items at the most competitive prices spread among North African wholesalers.

17It was in Dubai that Yiwu’s reputation as a commercial hub was made for Muslims of the Arab world, the African continent, and the Middle East. Dubai businesspeople had developed imports and re-exports from Asia (Lavergne 2002) on a regional (Persian Gulf, Iran, Iraq in particular) then a transcontinental scale (Arab World and Africa). Yiwu’s growing influence occurred along with the multiplication of links with key industrial areas in China and the establishment of a growing number of Emirati trading companies, notably at Yiwu (Bertoncello et al. 2009), in order to capture wholesale markets in the process of internationalization.

18The Gulf States, as importers of labor and goods, were also places for opportunities and meetings for migrant-entrepreneurs. An Algerian importer, who became a restaurant owner in Yiwu and began trading by carrying shopping bags from Istanbul, was struck by what he saw in Dubai: “There, seeing the Emiratis, Iranians, my friends and I realized that we were not yet at the source, which was in China” (author’s interview). Khaled, a Lebanese restaurant owner, made the same discovery when he was a cook in Kuwait until his merchant friends convinced him to go invest in China because money could be made faster there. Saad, another Algerian from Setif, explained his progression towards China: In 1992, private commerce took off in Algeria and he began importing goods from France, Eastern Europe, Dubai and Qatar to fuel the ‘Dubai market’ of El Eulma close to Setif, whose customer catchment area was national. One of his friends told him that: “China is the source of all products. Let’s leave for the Gulf and go further east, to the source” (author’s interview). Saad followed his friends, discovered Yiwu and now goes there every two months to prospect the markets and to check orders with his Chinese freight forwarder.

19Starting in the 2000s, a core network was built between operators in Yiwu and in Dubai, which became a real interface between the Muslim worlds and China where the freight companies were located and above all the banks, where a large part of the payments for wholesale purchases in Yiwu were transacted. Many small importers, however, tried to circumvent Dubai by going directly to the market-city.

Business Consulting