Export Barometer Seeks Rebound

World’s biggest small trade hub explores new ways to recover from pandemic

Wang Minfeng’s tools and hardware company in Yiwu, a city in Zhejiang Province, east China, is searching for ways to survive the economic impact of the novel coronavirus disease (COVID-19) pandemic.

Wang started the business even before the Yiwu International Trade City, the world’s largest small commodity trade hub with more than 70,000 tenants, was established in 2001, the year China joined the World Trade Organization. It survived the severe acute respiratory syndrome outbreak in 2003 and the global financial crisis in 2008, but now he thinks neither compares to the havoc wreaked by COVID-19.

“We faced challenges from the domestic supply side at the beginning, and now, difficulties from the overseas demand side,” he sighed. “This year could be the hardest for foreign trade companies.”

Yiwu, a barometer for the health of Chinese exports, has taken a hit, with data from the city’s customs authority showing its export value decreased by 14.7 percent year on year in the first quarter of the year. The total import and export value declined by 13.3 percent.

The Yiwu International Trade City, a massive complex of over 4.7 million square meters, began to face a significant lack of demand since April as the pandemic swept across the globe. Like Wang, many other micro, small and medium enterprises (MSMES) in Yiwu that mainly sell to overseas customers, are trying to find new ways and buyers to keep their head above water.

Drop in demand

Yiwu reopened its market relatively early, on February 18, with strict safety measures. To facilitate work resumption, the local government sent out charter vehicles and trains to pick up workers from outside the city, and provided free accommodation and reimbursed flight tickets to attract foreign merchants and more business.

Wang’s company, which both makes and sells hardware, has a storefront in the Yiwu International Trade City complex. It resumed work as soon as the market complex reopened.

He said in February, demand was scarcely affected. The total order value during that month actually went up slightly, compared with the same period last year. However, the late return of some employees caused delays in production and a 50-percent drop in output compared to February 2019.

When the virus began to be contained in China and production gradually resumed, other countries began to be ravaged. Wang said the mass shutdown worldwide resulted in a drop in demand starting in April. Only a big order in April from Libya thanks to an acquaintance saved the company from registering a 90-percent annual drop in revenue. However, Wang said that was a lucky break and unlikely to happen regularly.

In the last week of April he grew concerned that the company would have no production tasks by mid-may and without demand to sustain production, he would have lay off some workers. “The order shortage has a very big impact on MSMES like us,” he said.

Silver linings

But while the supply chain and consumption are affected by the pandemic, there is some good news, according to Hong Junjie, head of the School of International Trade and Economics at the University of International Business and Economics.

Hong said the domestic market is big enough in itself and it is always there for trade companies to explore. His suggestion to foreign trade companies, particularly MSMES that are vulnerable to risks, is to include the domestic market into their targets.

Zhang Jianping, a senior researcher at the Chinese Academy of International Trade and Economic Cooperation at the Ministry of Commerce (MOFCOM), echoed him, saying, “The companies should diversify their market options after evaluating market risks according to the outbreak situation and trend.”

Both experts also think the Belt and Road market is another market with potential to tap into. “With the effort put into its construction, the Belt and Road has created more space for foreign trade,” Hong said.

According to customs data, China’s foreign trade with economies related to the Belt and Road Initiative rose 3.2 percent on a yearly basis to 2.07 trillion yuan ($291.36 billion) during the first quarter.

The two experts also highlighted the importance of the Internet. Zhang said businesses can promote products and services faster through e-commerce platforms. Hong said online marketing, e-commerce and new technologies “can be applied to address difficulties in finding business channels in new markets and help to establish a direct connection with customers.”

Wang’s company, which has wholesale and supermarket clients in Africa, South America, the Middle East, Southeast Asia and Europe, is now turning to the Chinese market. He began to advertise products domestically and re-tailor them for Chinese consumers.

However, as he pointed out, developing new products usually takes a long time. For a company that had been entirely outfitted for businesses overseas, turning domestic is not an easy turn.

Opportunity in crisis

For some businesses in the Yiwu International Trade City, this difficulty may stop them from turning domestic altogether.

Liu Junming, who owns a sanitary ware business located in the complex, said although his company started looking inward even before the outbreak, he has no plans to increase the size of domestic business from the current 1213 percent since this kind of transition is not something that could be done in merely one or two months.

Instead, Liu is counting on new media and online platforms to help increase sales. In March, the company began to develop

order value through mid-may registered only about 40 percent of what it was a year ago, and most of the orders have been small. The drop in demand has also led to a decrease in the company’s production resumption rate from 80 percent in late March and early April to 60 percent in May.

Seeing the pressure of cash flow on the companies, the city government is offering those registered in Yiwu a two-month interest exemption for loans and a reduced interest rate for future loans. The trade hub also launched a policy to exempt its tenants’ rent for two months.

Liu said the policies are helpful and the twomonth rent waiver can enable his company to run for 10 days. However, companies should rely mainly on their own efforts.

Looking ahead