ASIA BUSINESS AND ECONOMICS

Yiwu: “From Chicken Feathers for Sugar” To “World Capital of Small Commodities”

By Sansan Wu

Translated by Pinyi Feng, Yunqiao Xu

In Yiwu China Commodity City Development History Exhibition Hall, a large rattle-drum brings back the childhood memories of many Yiwu people: the goods carriers walk from house to house, selling along the streets with a treasure box on their shoulders; chicken feathers can be exchanged for candy bars, toys and a variety of household items. The rattle-drum in their hands has turned Yiwu, which is a world-famous Commodity City nowadays……

At that time, Yiwu was still a poor county in central Zhejiang Province with limited natural resources. It is not near the sea, nor does it has any location advantages. Relying on the foundation of brown sugar processing industry since the late Ming and early Qing dynasties, the Yiwu people used the locally produced brown sugar and other kinds of sugar granules and cubes processed with brown sugar to trade for chicken feathers. Amongst the feathers exchanged, the premium ones were processed and sold as feather dusters, while the rest were used as fertilizer. As time went by, they added needles and threads, hair clips, handkerchiefs, headscarves, and other goods as their trade items, changing from the single business model of “chicken feathers for sugar” to the diversified business model which includes more daily-use commodities.

In the 1970s, some sugar traders specialized in long-distance trading, thus forming a community of small commodities buyers. Simultaneously, some ingenious Yiwu people also began to find ways to process some small commodities and sell them to sugar traders and other consumers in the street markets. Thus, a spontaneous market for small commodities was slowly formed in Yiwu.

During that special historical time, the free market where people carry a basket of goods was the “tail of capitalism” and should be “cut off.” Despite the spring breeze of economic reform in 1979, the local governments were still very cautious about market behavior due to the inconsistent interpretation and implementation of higher-level policies across the country, and the small-commodity market on which “chicken feathers for sugar” remained as a gray area. Peddlers and merchants can be labeled as “opportunists” if they are not careful.

In 1982, Xie Gaohua, who was the Secretary of the Yiwu County Party Committee at that time, risked losing his official position to open the government-led market for small commodities. With the statement of “Respect the public’s initiative, I am responsible for any problems!” he took on all the responsibility, but also to sweep away the worries of the Yiwu vendors at that time. This action opened up the golden age of the Yiwu market.


Breaking Out of the Cage: Opportunities for Yiwu’s Rise

On September 5, 1982, the market quietly opened under the approval of government officials, with an investment of 9,000 yuan and an open-air market with 705 stalls laid on concrete slabs. The turnover for that year was 3.92 million yuan. On the day of the market’s opening, there were no drums playing, no flags flying, no leaders showing up on the scene, and hundreds of merchants quietly setting up their stalls in the open air, with tacit understanding of each other’s intentions.

History never boasts of itself. When we return to the scene, we often find ourselves feeling appalled at the silence of a far less ambitious narrative. It is such a tacit acknowledgment that makes Yiwu break through the layers of encirclement and take a substantial key step.

After breaking the confinement, the Yiwu market made the world amazed by its rapid development. In the past thirty years, with five changes of location and ten expansions, Yiwu International Trade City has covered an operating area of 5.5 million square meters, dealing with 26 major categories and 1.8 million items. If you stay at each booth for three minutes, it will take a year and a half to complete the walk.


The dramatic changes in Yiwu over the past few decades have been attributed not only to the hardworking and courageous spirits of the Yiwu people but also to two indispensable factors.

First, the local officials of Yiwu are responsible and competent. Xie Gaohua, who was the county party secretary for two years, not only did he decisively allow the opening of the market, but also proposed the “business to build the county” approach which has been inherited even today and evolved into the core soul of Yiwu’s development. Since then, the party and government of Yiwu have continued to innovate according to market demand. In 1993, the government developed “business for industry, trade and industry linkage” strategy to expand into the industry. “Made in Yiwu” was born, with the invincible support from the strong local industrial industry.

Second, China’s accession to the WTO provides a good opportunity for Yiwu. Yiwu successfully seized the opportunity of China’s accession to the WTO. It catches the train of global trade on the way to international development. According to data provided by the Yiwu Municipal Bureau of Statistics, in 2001, Yiwu had an export value of 106 million U.S. dollars; in 2017, the number reached $33.98 billion, which had increased more than 300 times. The Degree of Foreign Trade Dependance (FTD) had also increased from 5% in 2001 to more than 65% in 2017. So far, Yiwu has completed the perfect transformation from the “chicken feathers for sugar” to the “World Commodity Capital.”

Feathers Rising in the Sky: New Opportunities for the Belt and Road

In 2013, President Xi Jinping proposed the “One Belt, One Road” strategy. Once again, Yiwu actively seized the historic opportunity to build and improve the Yiwu Port, railroad ports, airports, the International Mail Exchange Bureau, the Yiwu Bonded Logistics Center (Type B), which made Yiwu become the only county-level city with the functions of five major port platforms, making it a pivot city of international trade city in the Silk Road Economic Belt.


In 2014, the “Yixin Europe” China-European Union class train was opened, linking Yiwu and the other countries along “Belt and Road”. By 2018, the “Yixin Europe” has opened 9 international routes, maintaining import and export trade with 35 countries and regions. The trade cooperation potential between emerging markets has become a new driving force for the development of Yiwu’s foreign trade in recent years.

According to Yiwu Customs statistics, in 2019, the total value of foreign trade import and export of Yiwu was 296.78 billion yuan, increasing 15.9% from the same period last year. From the perspective of trading countries, the total value of foreign trade import and export of top two trading partners – Africa and the Middle East, had reached 69.22 billion yuan, 61.57 billion yuan, an increase of 17.3% and 13.9%, respectively.
With the deepening development of The Belt and Road Initiative, in 2019, the total value of imports and exports of Yiwu to countries and regions along “Belt and Road” has reached 141.39 billion yuan, with an annual growth of 12.9%, accounting for 47.6% of the total foreign trade value.

“E-commerce for the market”: a new choice under the Internet wave

With the rapid development of Yiwu, a historical event that reshaped China’s business world and revolutionized the way people consume was slowly underway: Hangzhou, 139 kilometers away from Yiwu, gave birth to the originator of an e-commerce company that a lot of people think has had huge impact on the physical channels of commerce.

With the development of e-commerce and the “Yiwu model” entering into the bottleneck period, embracing e-commerce has become a natural decision for Yiwu vendors and the government. In recent years, the Yiwu government has considered commerce as the main engine of market transformation and upgradation, and the government has also promoted the concept of “e-commerce for the city”, which has made Yiwu the second-highest density of cross-border e-commerce city.

When the market is still stuck in the traditional market of e-commerce “replacement or complementary” in the controversy, Yiwu e-commerce transactions have outperformed the traditional physical transaction. Yiwu City Market Supervision Bureau data showed that in the first 11 months of 2016, Yiwu’s e-commerce transaction volume, including domestic and foreign trade, reached 164,2 billion yuan, with the transaction volume of Small Commodity City amounting to 97.43 billion yuan. 

Plan and Change in Crisis

With the macroeconomic development of China, Yiwu has seized every coming opportunity; thus, it becomes the world’s largest wholesale market for small commodities. In 2020, when the pandemic is raging around the world, the shadow of foreign trade has been cast on Yiwu. But, at the same time, it seems like a whip to urge Yiwu to accelerate the pace of transformation – the order cancellation, backlog of goods, and port suspension. The formerly bustling international trade city suddenly became quiet. With live broadcasting on the rise and the approval of the comprehensive bonded area, Yiwu starts to balance its domestic trade and exports.

Even without the pandemic, Yiwu, which has always been renowned for its exporting, has already come to a crossroads. Back in 2015, factors such as slow global economic recovery, sluggish external demand, and other factors have led to declines in both China’s imports and exports. At that time, Yiwu, which had been deeply integrated into the world economy, realized that there was a risk of “strong export only”. Also, in the same year, Yiwu proposed to take e-commerce, import trade and modern logistics as the three major focuses of its future transformation and development.

Apart from that, rising labor costs have also become one of the bottlenecks in the development of the Yiwu model. Yiwu small commodities is mainly low value-added products. In the past, low labor costs have supported the price advantage of Yiwu small commodities. Therefore, Yiwu small commodities with low price and good quality are sold all over the world. However, with the rising labor costs in recent years, the Yiwu model which previously relying on tight profit margins has been strongly impacted. In this regard, the Yiwu City Government is now actively guiding the optimization of product structure, the introduction of high-tech industries, and guiding the “Yiwu manufacturing” to the development of high value-added end of the industrial chain.

From the time of “a hundred kinds of products on both shoulders, a pair of sugar with 18 changes”, to today’s “buy globally, sell globally”, Yiwu has not only created the world’s largest commodity market miracle but “The Yiwu Experience” is also considered to be a typical sample of urban reform and development, after the “Wenzhou model”. Whether it is the paradigm of “chicken feathers for sugar,” “business building county,” or “business for industry, trade and industry linkage,” “e-commerce for the city, “what behind the ever-changing trade strategy of Yiwu is the basic rules of business. Facing new crises and challenges, can Yiwu, a city that adapted to the changes and took the initiative, once again standing on the cusp?

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