Yiwu: The Chinese city holding important lessons for Indian exports

Yiwu: The Chinese city holding important lessons for Indian exports

Yiwu

Increasing exports will play a vital role in taking India a step closer to the government’s US$5 trillion economy goal. Exports form the backbone of a country’s current account and thus growing exports are crucial for economic development.

Ahead of the budget 2020-21, the government has recently announced various measures such as export-related incentives, finance, credit and facilitation to boost India’s exports.

Amid the ongoing trade war, with costlier goods and reduced Chinese exports, the global importers are looking at India to fulfil their demand. 

However, over the decades, China’s export-led strategy has proven to be extremely effective and some of their strategies provide useful insights and lessons for India. 

In 1979, China allowed foreign trade and investment and implemented free-market reforms making it one of the world’s largest economies, with growth rates reaching as high as 9.5%. The World Bank described its growth as ‘the fastest sustained expansion by a major economy in history’ in 2018 and helped raise an estimated 800 million people out of poverty. 

China has become the world’s largest economy (in terms of PPP), manufacturer, merchandise trader and holder of foreign exchange reserves. The top cities contributing to the economy include Shanghai, Beijing and Shenzhen, however, the smaller cities have also started ramping up. 

Approximately three hours by train from Shanghai lies the ‘small-commodity city’ of Yiwu, in the Zheijang province of China. The term ‘small commodities’ encompasses items such as jewellery, decorative items, household goods, stationery and small electronic equipment. Yiwu is far from being a model global city, it is like a mega supermarket and there is nothing one cannot buy there. Yiwu boasts of more than 800,000 private companies that manufacture small, inexpensive commodities. 

Yiwu is based on the famous ‘Wenzhou model’ marking the transition from socialism to global capitalism, which has four key features: 

1.    It consists of small-scale private enterprises
2.    It specializes in wholesale petty commodity markets
3.    It is built on tens of thousands of mobile traders who facilitate the flow of material
4.    It is made possible by various forms of nongovernmental financial arrangements 

According to statistics from Yiwu customs, the total import and export value of Yiwu city from January to November 2019 was around $ 37.9 billion. Yiwu has seen booming trade with countries along with China’s belt and road initiative, with exports increasing by 11% in 2019. Importers from around the world come to Yiwu to buy goods, seen as a space for production, storage and re-export.

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 came from Yiwu. It is said that this market has become the production and distribution centre of daily necessities in the world.

Following the Chinese President Xi Jinping’s ‘one belt, one road initiative’, the various silk roads have increasingly converged to the city of Yiwu, whose motto reveals the goals of its local decision-makers: ‘Build the world’s largest supermarket, construct an international shopping paradise.’ 

For instance, the China-Europe train service has developed rapidly in Yiwu since it was first launched in 2014. It now plans to send 1,000 cargo trains to Europe in 2020. The service now has 11 routes linking Yiwu with 37 countries and regions across Eurasia. 

The Zhejiang province’s foreign trade with countries involved in the ‘Belt and Road Initiative’ maintained rapid growth last year. Its trade volume rose 8.1% to $449.1 bn in 2019. The area’s private enterprises accounted for 79.8% of the province’s total exports, making Yiwu the ultimate mecca for wholesale buyers.