Find it in Yiwu

As one of the witnesses and participants in Yiwu's market reform and opening-up, Zhang Zhongnian, who worked in the local government during the 1980s, still recalls remarks by the Yiwu county party chief Xie Gaohua: "We should give full support to farmers conducting business during the slack season and I will assume responsibility and resign if anything happens".

Without Xie, Yiwu, located in the eastern corner of Zhejiang province, might have remained an impoverished county as many other remote areas in China, rather than becoming the world's largest small commodities markets with a trade turnover of over 40 billion yuan per year.

With 65,000 booths in 20 different classified markets, if you drop by a booth for three minutes it takes a year to look around all the booths in Yiwu. People say there is nothing money can't buy in Yiwu. Even supermarket giant Carrefour and the United Nations are Yiwu's customers.

But three decades ago, Yiwu was a populous area of 1,105 sq km with insufficient farmland and weak basic industries. People had to seek out other ways to make ends meet.

Bartering business

The Yiwu brown sugar factory was the biggest factory in the county, Zhang says.

Because brown sugar was a local specialty, one of the ways to make money was to barter brown sugar made during slow economic times, while banging a small drum to attract attention. That practice had lasted 300 years before it was banned after the founding of the People's Republic of China as a "capitalist practice".

The deadlock was broken after the country embraced new economic practices at the urging of then-leader Deng Xiaoping in 1978.

Farmers in Yiwu resumed the old bartering practice but soon found a marketplace was needed to make bigger and better businesses.

In the 1980s, a small town near Yiwu called Nianshili was used as an open-air market for trading and bartering.

People usually carried two buckets of small goods on a bamboo shoulder pole. At that time the possibility was still high that government officials who had not fully embraced the free market concept could confiscate their goods.

Traders carried buckets so that they could escape as soon as possible with all belongings.

Two years later, the game of cat and mouse was over, thanks to a woman named Feng Aiqian.

After local inspectors confiscated her goods, Feng was so outraged that she went to the government building to complain.

"I didn't know where my courage came from. The 'cultural revolution' (1966-76) had ended not many years ago and people at that time still had a harsh memory of class struggle. I could have been put into prison," Feng, now 67, recalls.

"But I couldn't help speaking out. I told the county party chief Xie Gaohua with tears that we couldn't make a living by farming and I wanted to do business."

Xie promised he would discuss it with other officials, and started an investigation. Several months later, Xie found farmers could benefit from doing business during the slack season and it wouldn't affect the local agricultural production.

Since then, Yiwu government has given full support to local entrepreneurs. And that made it one of the boldest local governments committed to the market economy.

In 1982, the Yiwu government provided the first legal open-air market with 700 booths. That was the embryo of what is now the Yiwu small commodities city that has expanded to more than 20 markets with 65,000 booths.

The main markets offer more than 400,000 items classified under 1,700 categories, from arts and crafts, candles, gardening equipment, umbrellas, to watches, toys, and jewelry.

Yiwu is also a paradise for traders from all over the world, with up to 200,000 visitors per day on average and 6,000 foreign residents.

Tens of thousands of traders and businessmen from all over the world crowd in Yiwu every day to look for cheap products to sell in their home markets, transforming this small city into a prosperous trading center.

Palestinian businessman Hazem Shyoukhi, 30, was one of the first foreigners to source cheap products in Yiwu eight years ago. Back then, the city was just beginning to position itself as a hub for trading small commodities in the country.

"In 2000, there were not many foreigners here. Yiwu was a small city with grubby roads. Now it is a big and clean city with lots of foreigners because of business here," Shyoukhi says.

Manufacturing

While Yiwu was enjoying the fame as the world's top supermarket, some people also started to look at its industrial development.

In 1995, the Yiwu government started encouraging vendors to run factories.

Zhou Xiaoguang, a billionaire who owns the world's largest accessories manufacturing base called Neoglory China Holding Group in Yiwu was one of them.

"The local government picked up several vendors who had good business performance at that time, and encouraged them to set up their own factories. I was one of them," says Zhou. Back then, Zhou and her husband had bought a booth at Yiwu's Small Commodity City.

Her husband was in charge of purchasing materials, while she and her sisters manned the booth in the day and processed accessories at night.

"We worked day and night at that time. Everyone in the big family was like a robot charged with full batteries," says Zhou. "By then, we earned several million yuan. It took risks to invest in opening an accessories factory. But the government's help in guiding procedures for opening a factory prompted us to respond to the call."

"I personally went to local farmers' houses many times to persuade them to set up factories because they didn't want to take the risk," recalls Jia Guinan, director of Yiwu Economic Development Bureau.

"Most of them were very satisfied with their current conditions. Doing business at booths could offer them a handsome profit. So I enticed them with tax-free schemes in the beginning."

Now there are 25,000 manufacturers representing 20 industries. More than 50 percent of zipper and 70 percent of jewelry production in China comes from Yiwu and 40 percent of the electric clocks in the world are also from the area.

Nearly 95 percent of the entrepreneurs in Yiwu are ex-vendors, according to International Business Daily. They traded in the commodities market and shifted to manufacturing.

However, because Yiwu started the manufacturing business late in the game, the county found it was at a disadvantage.

And the recent tightened macroeconomic policies have made it more difficult for enterprises to find land.

Jia says Yiwu now courts hi-tech enterprises. But a lack of professional talents is thwarting the take-off of the local hi-tech industry.

"So I insist that Yiwu's future still rests on the small commodities market," says He Peisong, senior counselor of Yiwu Commodities City Group.

"Coming into Yiwu small commodities market is like attending the China Import and Export Fair - Canton fair. You can attend the "Canton Fair" everyday here. Yiwu should become a window and base for small and medium-sized enterprises. SME setting up a booth in Yiwu means it has an access to both domestic and global markets."

(China Daily 06/30/2008 page3)