No Xmas in July for Vendors at Yiwu's Market

The recent pickup in overseas demand came too late for Christmas orders. But while lamenting a lost season, the hundreds of traders in the small-commodity bazaar in Yiwu, Zhejiang Province, said they were holding their hopes high for the spring-buying season, which will begin in earnest after the National Day holiday.

Lounging in her store in the airport-sized building, Jin Xianjuan recounted the many anxious weeks in early summer as she waited for the seasonal flood of orders that never came.

Jin, who has been in the export business for more than 10 years, said it was the worst time she has ever experienced.

Overseas orders for pre-Christmas deliveries usually are the highlight of the year for her and many other traders in Yiwu, the leading market town for the thousands of small-good manufacturers in the highly industrialized Zhejiang Province.

"We earn a fair chunk of our annual income from Christmas sales," Jin said.

The traders mainly deal with overseas buyers and with bulk orders, excluding, of course, clients from around the region dropping by to buy a cute doll or a new electronic gadget that is not yet available in traditional retail shops.

"Our bread-and-butter business is bulk sales to buyers from Europe or the Middle East," said Jin.

Like all the other traders, Jin spends most of her time waiting for buyers to visit her shop. Before the global financial crisis started in 2008, the vast space in the five-bazaar complex was full of buyers from around the world in the busy periods. In those days, "almost every season was busy", said Jin. "There were no slack times to speak of."

But things have changed.

"This year's Christmas sales were particularly bad for us," said Jin. "Orders have dropped by an average of 50 percent."

An average order used to be worth about 100,000 yuan (US$16,290), she said. This year, "the average size of each order was smaller and we had to cut our prices to get more orders", she added.

The tough times, Jin said, were exacerbated by the appreciation of the yuan against the US dollar and other major currencies.

"Our profit margins are very thin already," Jin said. "There was no way we could pass on the exchange risks to the buyers, because they weren't doing that well either."

Latest data from the Hangzhou Customs District showed that the Christmas products shipped out from Yiwu Customs between May and June amounted to US$13.8 million, down 7.1 percent year-on-year. The drop was even bigger in yuan terms as a result of the appreciation.

July's Yiwu Commodity Index, which tracks export volume, showed that the shipment of Christmas products decreased from 1,299.25 points on June 1 to 1,090.03 points on June 30.

Interviewed at his Yiwu office in July, trader Sun Fayou said that he had not received a single order in two straight weeks. Such a lull, he said, had never happened before.

“It was definitely the hardest year in the past decade because of the slow recovery of the European economy,” said Sun, adding that he expects to see at least a 30 percent drop in sales revenue this year. He desperately hopes that the global economy recovers as quickly as possible.

His wish may be coming true.

After witnessing a slowdown in the last two quarters, China's economy seems to have returned to positive terrain, with its key manufacturing gauge rising to a 16-month high in August on the back of strong new orders.

The indicator also gave enough proof that there's been a steady improvement in China's overall economic conditions and that the government measures have helped steer the world's second-largest economy out of its longest period of slowdown.

The manufacturing Purchasing Managers' Index, which reflects factory production activity, rose to 51.1 in September from 51 in August, the third month in a row of growth, according to official statistics. A reading above 50 indicates activity in the sector is accelerating.

The increase was supported by new orders, which rose to 52.8 in September — the highest reading in more than a year — compared with 52.4 in August.

New export orders rose to 50.7, up 0.5 of a percentage point.

“Although we didn't get the recovery of export orders for the Christmas season, we're quite delighted to know that the number of orders is coming back slowly as expected, which will bring us a better year in 2014,” said Du Deyue, general manager of Yiwu Xinxin Balloons Co Ltd.

Industry insiders said that Yiwu's advantage when it comes to cheap commodity products has been eroded, and that the region's products should be upgraded and have higher quality standards.

“The gradual increase in the costs of labor and materials has forced companies in Yiwu to raise their prices to make profits, which have also been reduced sharply because of less demand from overseas,” said Xiao Wen, a professor in the international economics department of Zhejiang University.

Xiao added that it's time to enhance the quality of the products and to start directly targeting larger companies for regular cooperation projects, instead of relying on individual buyers.