In the centre of Zhejiang province, about three hundred kilometres south-west of Shanghai, a county-level city of some two million people has become the largest wholesale market for small commodities in the world. Yiwu has no major port, no great natural resources and, until the 1980s, very little industry. Its principal attraction for traders is a single complex of buildings, the Yiwu International Trade City, which contains more than 75,000 booths offering, according to the market’s own figures, about 2.1 million varieties of goods in twenty-six broad categories. Buttons, zips, socks, toys, artificial flowers, hair clips, kitchen utensils, Christmas decorations, umbrellas, stationery, small electrical goods, religious articles and party supplies are bought here in bulk by merchants from every continent and shipped in containers to markets in Africa, the Middle East, Latin America, Russia, Central Asia, Europe and North America. The story of how a poor agricultural county became a global marketplace is one of the most distinctive episodes in the history of China’s economic reforms, and it began not with a government plan but with the itinerant traders who had worked the roads of the region for centuries.
A poor county and its travelling traders
Yiwu lies in a basin among low hills in the central part of Zhejiang, within the prefecture-level city of Jinhua, to which it is still administratively subordinate. The name should not be confused with Yiwu in southern Yunnan, a different place written with different characters, which is one of the six famous tea mountains and a starting point of the caravan routes described in the post on the Tea Horse Road. The land is relatively infertile, much of it red clay, and for most of its history the county supported a dense rural population with difficulty. Its farmers grew rice, sugar cane and other crops, and in the slack seasons many of them supplemented their incomes by travelling as pedlars. The characteristic trade of the region was known as “chicken feathers for sugar”. Yiwu pedlars carried brown sugar, made from local cane, and later small manufactured items such as needles, thread and buttons, to villages across Zhejiang and neighbouring provinces, where they exchanged them for chicken feathers. The feathers were used as fertiliser on the poor local soils, and the better ones were sorted and sold for making dusters and other products. The pedlars carried a small drum, the sound of which announced their arrival in a village, and they were known as “drum-shakers”.
The practice is recorded from at least the Qing dynasty, and by the early twentieth century it had become an important part of the local economy, involving thousands of households. The pedlars developed a detailed knowledge of the roads and markets of eastern China, a network of contacts, and a habit of trading on small margins and in large volumes. These skills survived into the period of the planned economy after 1949, although private commerce was officially discouraged and at times prohibited. During the 1960s and 1970s pedlars continued to trade, sometimes under licence and sometimes clandestinely, and the local authorities alternated between tolerating them and suppressing them as speculators. By the late 1970s small informal markets had appeared in several townships of the county, where pedlars bought and sold goods among themselves.
The opening of the market in 1982
The economic reforms that followed the Third Plenum of December 1978 created conditions in which these informal markets could grow, but the decisive step was taken locally. In 1982 the newly appointed party secretary of Yiwu county, Xie Gaohua, was approached by Feng Aiqian, a woman who sold small goods at a stall in the county town and who had repeatedly been fined and had her goods confiscated by the authorities. According to the account that became part of the city’s official history, she asked him directly why the government would not allow people like her to trade. After investigating the situation, Xie and the county government decided in September 1982 to permit an open market for small commodities to operate in the town of Choucheng, the county seat, and they adopted a policy of “four permissions”: permitting farmers to engage in commerce, permitting long-distance transport and sale, permitting urban and rural markets to be opened, and permitting competition among multiple channels. The decision was bold at a time when national policy on private trade remained uncertain, and the county leaders later described it as a calculated risk.
The first market was little more than a street lined with about seven hundred simple stalls, made of boards laid across trestles and shaded by plastic sheets. It was popular from the start. Traders came from surrounding counties to buy goods for resale, and local households that had previously sold door to door now set up permanent stalls. In 1984 the county adopted a strategy of developing the county through commerce, and a covered market with about 1,800 stalls was built. It was followed by successively larger buildings in 1986 and 1992, each of which was soon full. The growth of the market was closely tied to the development of small-scale manufacturing in Zhejiang, where family workshops and township enterprises produced the buttons, socks, toys and household goods that the traders sold. Some of these workshops were in Yiwu itself, but many were elsewhere in the province, in towns that specialised in particular products: socks in Datang, neckties in Shengzhou, buttons in Qiaotou, and so on. Yiwu became the point at which the output of thousands of such workshops met buyers from across China.
The county was upgraded to a county-level city in 1988, reflecting its new economic importance. In the early 1990s the Yiwu China Small Commodities City, as the market was then called, was already reported to be the largest market of its kind in the country by turnover, and the city government formed a company to own and manage the market buildings. That company, now known as Zhejiang China Commodities City Group, was listed on the Shanghai Stock Exchange in 2002, and the city government remains its controlling shareholder.
Turning outward
For the first decade of its existence the market served mainly domestic customers. Buyers from other provinces bought goods in Yiwu and resold them in the markets and shops of their home towns, and the city’s freight companies developed a dense network of routes connecting it with almost every part of China. During the 1990s foreign buyers began to appear in increasing numbers. Some came from Hong Kong and Taiwan; others were merchants from the Middle East, South Asia and Africa who had previously bought goods in Guangzhou or in Dubai and who found that Yiwu offered a wider range of products at lower prices and in smaller quantities than they could buy directly from factories. A buyer in Yiwu could assemble a container of mixed goods, a few cartons of each of dozens or hundreds of products, from suppliers who would accept orders far smaller than a factory would normally consider. This ability to combine many small orders into a single shipment was the market’s distinctive advantage, and it made Yiwu especially important for traders who supplied the retail markets of developing countries, where shopkeepers sold a wide variety of low-priced goods in small quantities.
China’s accession to the World Trade Organization in December 2001, and the liberalisation of trading rights that followed, accelerated this transformation. Before accession most firms needed special authorisation to export, so that goods bought in Yiwu by foreign merchants usually passed through state trading companies or licensed export agents. After the liberalisation of trading rights in 2004, private firms could export directly, and many of the market’s stallholders and the freight forwarders who served them began to handle foreign trade themselves. The share of the market’s goods sold abroad rose steadily, and by the late 2000s the market authorities were reporting that a majority of the goods sold in the trade city were exported.
The International Trade City
To accommodate this growth the city government undertook the construction of a new market complex on the northern edge of the city. District 1 of the Yiwu International Trade City opened on 22 October 2002. It covered about 28 hectares, with a floor area of about 340,000 square metres and more than 8,000 booths, and it was devoted mainly to toys, artificial flowers, jewellery and handicrafts. District 2 opened on 22 October 2004, District 3 in 2005 and District 4 in 2008, followed by District 5 in 2011. Each district is a vast building of several storeys, its interior divided into corridors lined on both sides with small booths, typically ten to fifteen square metres in area, in which a family business displays samples of its goods. The booths are grouped by product, so that one floor may be given over entirely to socks and another to hair accessories, and a buyer may walk past several hundred sellers of similar goods in a single afternoon. The market’s scale is often expressed by a frequently quoted calculation: a visitor who spent three minutes at every booth for eight hours a day would need more than a year to see them all.
Most of the booths are operated by small family firms, many of which own or are linked to workshops elsewhere in Zhejiang or in neighbouring provinces. The goods on display are samples; orders are placed at the booth, often after negotiation over price and quantity, and the goods are delivered later from the factory to a freight forwarder or consolidation warehouse, where they are packed into containers with goods from other suppliers. A buyer typically employs a local agent, often a trading company run by Chinese staff or by foreign residents, to accompany him through the market, translate, check the quality of the goods and arrange shipment. The relationships between buyers, agents and suppliers rest heavily on trust and repeated dealing, and credit is commonly extended on informal terms.
In 2005 a joint report by the World Bank, Morgan Stanley and other organisations described Yiwu as the largest market for small commodities in the world, a recognition that the city has quoted ever since. The market authorities have published an annual index of the prices of small commodities, the Yiwu China Commodity Index, since 2006, and the city hosts an annual trade fair, the China Yiwu International Commodities Fair, that attracts buyers from around the world.
A city of foreign merchants
The growth of the export trade transformed the population of the city. By the late 2000s Yiwu had a resident foreign population, according to local government figures, of more than ten thousand people, together with a much larger number of short-term visitors; annual arrivals of foreign buyers were reported to exceed several hundred thousand. Merchants from Yemen, Iraq, Syria, Jordan, Egypt, Iran and Afghanistan were among the earliest to settle, followed by traders from India, Pakistan, Bangladesh, Turkey, Russia, the countries of Central Asia, and many parts of sub-Saharan Africa, notably Nigeria, Senegal, Mali, Ghana, Kenya and Somalia. Some came for a few weeks each year; others established trading companies, married local residents and raised families in the city.
The presence of these communities gave parts of Yiwu a character unlike that of most Chinese cities of its size. An area of the city near the old market became known for its Arabic, Turkish and Persian restaurants, with signs in Arabic script, and cafés where merchants met to discuss business late into the evening. A large mosque, converted from a former textile factory and later rebuilt, served the Muslim population, both foreign and Chinese, and the city also had churches attended by foreign Christians. Many Chinese residents, especially young graduates from the Muslim Hui communities of north-western China, came to Yiwu to work as Arabic interpreters and trade agents, and their linguistic skills became an important part of the market’s commercial infrastructure. The city’s administration developed specialised services for foreign residents, including mediation committees in which foreign merchants took part in resolving commercial disputes, an unusual arrangement in China that attracted the interest of legal scholars.
Anthropologists who have studied Yiwu, including Chinese and foreign researchers working among the Arab, African and Afghan trading communities, have described the city as a node in what they call “low-end globalisation”: the trade in inexpensive goods conducted by small merchants through informal networks, as distinct from the trade of multinational corporations. In this trade a merchant from a West African city might travel to Yiwu several times a year, buy a mixed container of household goods, clothing accessories and electronics, ship it home through a freight forwarder, and sell the contents through a network of relatives and associates in local markets. The margins were often small and the risks considerable, but the trade supplied consumers in many developing countries with goods that would otherwise have been unaffordable.
Christmas, football and the goods of the world
The variety of goods traded in Yiwu has made the city a frequent subject of journalistic curiosity, and certain products have become emblematic of its role. Yiwu is often described as the source of most of the world’s Christmas decorations. Several hundred factories in and around the city produce artificial trees, tinsel, baubles, lights and figures of Father Christmas, much of it for export to Europe and the Americas, and the production season runs from early in the year until the late summer, when the last shipments leave for markets in the northern hemisphere. Many of the workers in these factories, like many people in China, do not celebrate Christmas themselves, and the contrast has been noted in many reports.
The market has also become known as an informal indicator of international events. Before major football tournaments, sales of flags, scarves and supporters’ accessories for particular teams are watched by traders as a rough guide to which countries’ fans expect their sides to progress. During election campaigns in other countries, merchants in Yiwu have received orders for flags, banners, hats and badges for rival candidates, and press reports in several elections have cited the volume of these orders as a curiosity. Such reports are anecdotal, and the market authorities have treated them with good humour, but they illustrate the degree to which Yiwu’s suppliers are connected to consumer demand around the world.
The range of products has also changed over time. In the 1980s and 1990s the market was dominated by simple manufactured items produced in family workshops. In later decades the range broadened to include small electrical appliances, consumer electronics, tools and hardware, sports equipment, cosmetics and many goods sold online. Suppliers have increasingly invested in design, branding and quality control, responding to rising labour costs in Zhejiang and to competition from producers in other parts of China and in South and South-East Asia.
The working day of the market
The rhythm of the market is set by the hours of the trade city, which opens in the morning and closes in the late afternoon, and by the much longer hours of the businesses that support it. Stallholders typically arrive early to arrange their samples and deal with messages that have come overnight from customers in other time zones. Many booths are run by a married couple or by a parent and an adult child, one of whom stays at the booth while the other visits the family’s workshop or suppliers. The samples on display are usually fixed to boards or arranged on shelves, each with a code that identifies it in the seller’s catalogue, and a buyer who expresses interest is given a card or a printed sheet listing prices for different quantities. Negotiation is conducted with calculators, in a mixture of Mandarin, English, Arabic, Russian, Spanish and other languages, and increasingly with translation software on mobile telephones.
A typical transaction begins with a buyer, often accompanied by an agent, selecting samples from a number of booths over several days. The agent records the products, quantities, prices and delivery dates, and once the orders are confirmed the buyer pays a deposit, commonly around thirty per cent. The suppliers then produce or assemble the goods and deliver them, labelled with the buyer’s marks, to the agent’s warehouse by the agreed date. There they are inspected, counted and stored until the full order is ready. The remaining payment is made before the container is loaded. Because a single container may hold goods from fifty or a hundred suppliers, the coordination of these deliveries is a demanding task, and the reputation of an agent depends on the accuracy with which it is performed.
The market’s suppliers have also had to adapt to the demands of foreign customers. A product sold in West Africa may need different packaging, labelling and price points from the same product sold in Russia or in Latin America, and suppliers who serve several markets maintain variations of their goods for each. Buyers from different regions are known in the market for different preferences: some for the lowest possible prices, others for particular colours, sizes or designs, others for higher standards of finish. Over time many suppliers have learned to anticipate these preferences and to design products specifically for them, and some have opened showrooms or offices abroad, in Dubai, Moscow, Lagos, São Paulo and other cities, to be closer to their customers.
Freight, warehouses and the movement of goods
The physical movement of goods out of Yiwu depends on a large logistics industry that grew up alongside the market. Freight forwarders, consolidators and transport companies occupy entire districts of the city, with warehouses where goods from many suppliers are gathered, sorted, packed and loaded into containers. Trucks carry the containers to the port of Ningbo-Zhoushan, about 150 kilometres to the east, which has become one of the busiest container ports in the world, or to Shanghai. For smaller consignments, forwarders offer consolidated shipping, in which goods from several buyers bound for the same destination share a container, an arrangement that allows merchants who cannot fill a container on their own to ship at reasonable cost.
The domestic freight network is equally important. Yiwu’s logistics companies operate routes to almost every city in China, and many goods sold in the market are sent not abroad but to wholesalers and retailers in other provinces. The city’s freight market, where trucking companies advertise their routes and accept consignments, was for many years one of the largest in the country. The development of the express delivery industry in the 2010s added a new layer, as the major parcel companies built sorting centres in Yiwu capable of handling the enormous volume of small packages generated by online retail.
The city’s inland port and its customs facilities form the link between these networks and international trade. Containers can be declared for export in Yiwu, inspected and sealed, and then transferred to the seaport or the railway terminal without further customs formalities. The railway terminal, opened in the mid-2010s, handles the freight trains to Central Asia and Europe, while a bonded zone allows imported goods to be stored and displayed for sale. Since the late 2010s the city has also promoted imports, opening a hall in the trade city for goods from abroad, including wine, food, cosmetics and handicrafts, which reflects the government’s wish to balance the city’s trade and to present Yiwu as a two-way marketplace.
Reform and trade policy
Yiwu’s role was recognised in national policy in March 2011, when the State Council approved a comprehensive reform pilot for international trade in the city, one of a small number of such experimental zones in China. The pilot was intended to develop new rules suited to the market’s distinctive form of trade, in which large numbers of small consignments of many different goods were exported by small firms and individual merchants. Under the ordinary customs and tax procedures, each export consignment required detailed documentation and each exporter needed to be registered for foreign trade, requirements that were poorly suited to a container holding goods from dozens of suppliers bought by a foreign merchant who was not a registered Chinese exporter.
In response, the authorities introduced a new customs procedure, known as “market procurement trade”, which allowed goods bought in designated markets to be declared for export in simplified form, with a single declaration covering many types of goods, and with special arrangements for value-added tax. The code assigned to this procedure in Chinese customs statistics, 1039, gave it the informal name “1039 trade”. The procedure was tested in Yiwu from 2013 and later extended to other specialised markets in China. It also permitted foreign merchants to register as traders in their own names, a step that formalised arrangements that had previously depended on Chinese intermediaries. Local officials described the reforms as an attempt to bring the informal trade of the market within a legal framework without destroying the flexibility on which it depended.
The railway to Madrid
The most widely reported symbol of Yiwu’s international reach was the opening in November 2014 of a freight rail service between Yiwu and Madrid. The Yiwu–Madrid railway route runs for about 13,052 kilometres across China, Kazakhstan, Russia, Belarus, Poland, Germany and France to Spain, and at the time of its opening it was described as the longest freight rail route in the world. Because the railway gauges of the former Soviet Union and of Spain differ from those of China and of central and western Europe, containers must be transferred between trains at the borders, and the journey initially took about twenty-one days, later reduced to sixteen to eighteen. The first train carried toys, household goods and other small commodities to Madrid, and it returned with Spanish wine, olive oil, ham and other products for the Chinese market.
The service was part of a wider network of freight trains linking Chinese cities with Europe that expanded rapidly after 2013, encouraged by the Chinese government as part of the Belt and Road Initiative and supported by subsidies from provincial and municipal governments. Yiwu also established services to Central Asia, Iran, Afghanistan, Russia, Belarus, Poland, Germany, the United Kingdom and other destinations. Rail freight remains a small part of the city’s exports by volume, most of which travel by road to the port of Ningbo and then by sea, but it offers a faster alternative to ocean shipping and a cheaper one than air freight. The relationship between Spain and China, in which this trade forms one strand, is discussed in the post on how Spain bets on China as Europe hardens.
Online trade and the parcel economy
From the late 2000s the rise of online commerce changed the way goods were bought and sold in Yiwu, and the city adapted to it with characteristic speed. Domestic platforms such as Taobao, launched in 2003 by Alibaba Group in Hangzhou, a little over a hundred kilometres to the north, allowed small sellers to reach consumers throughout China, and many of Yiwu’s suppliers and traders established online shops. A village on the edge of the city, Qingyanliu, became known for the concentration of online sellers that grew up there from about 2008. Young people from across China moved to the village to set up businesses, renting rooms in which they photographed goods bought in the market, listed them on online platforms and packed and posted orders. By the early 2010s the village was described in the Chinese press as one of the most prominent “Taobao villages”, the term used for rural settlements in which a large share of households are engaged in online retail, and it attracted official visitors from around the country.
The growth of online sales made Yiwu a major centre of the parcel delivery industry. The city’s express delivery companies handle many millions of parcels each day, and in the 2010s and 2020s Yiwu was regularly reported to be one of the busiest cities in China for express deliveries, sometimes ranking above much larger cities. Cross-border e-commerce, in which goods are sold online directly to consumers abroad, became increasingly important from the mid-2010s, with Yiwu suppliers selling through international platforms. The small parcels that leave Chinese warehouses for buyers in Europe and North America, a trade described in the post on the parcel at the door, include a large number of goods that originate in the factories and market of Yiwu.
The shift toward online trade raised questions about the future of the physical market. Some observers predicted that the booths of the International Trade City would empty as buyers turned to online platforms and dealt directly with factories. The market authorities responded by developing their own online platform, linked to the physical booths, and by encouraging stallholders to use live-streaming and social media to reach buyers. Visitors to the market in the 2020s described corridors in which stallholders streamed live video of their products to online audiences from their booths, while foreign buyers continued to walk the halls inspecting samples. The physical market has continued to operate on a large scale, and its managers argue that the ability to see, touch and compare goods, and to negotiate directly with suppliers, remains valuable to buyers.
Education, migration and the people of the market
The market drew not only foreign merchants but also very large numbers of migrants from other parts of China. By the 2010s the city’s registered population of under a million was outnumbered by migrants from Anhui, Jiangxi, Henan, Sichuan, Guizhou and other provinces, who worked in the workshops, warehouses and logistics companies, ran booths of their own, or set up online shops. Many arrived with little capital and began as employees of established traders before opening businesses of their own. The city’s vocational colleges responded to the demand for skills by offering courses in foreign languages, international trade, logistics and e-commerce, and the Yiwu Industrial and Commercial College, founded in the 1990s, became known for training students in online retail and for encouraging them to start businesses while still studying. Arabic, Spanish, Russian and other languages are taught widely in the city, and local schools have admitted the children of foreign residents. These institutions have helped to sustain the supply of agents, interpreters and young entrepreneurs on which the market depends, and they reflect the degree to which an entire urban economy has been organised around a single commercial institution.
Yiwu in the wider economy
Yiwu’s growth has made it one of the wealthiest county-level cities in China. Its gross domestic product grew from a very small base in the early 1980s to more than one hundred billion yuan in the late 2010s, and the average disposable income of its residents has been among the highest of any city in China. The city has built an airport, a station on the high-speed railway between Shanghai and Kunming, extensive logistics parks and an inland port, at which containers can be cleared through customs before being sent to Ningbo for loading onto ships. A dry port arrangement allows goods to be inspected and sealed in Yiwu, simplifying the passage of containers through the seaport.
Economists and sociologists in China have often cited Yiwu as an example of what is sometimes called the Zhejiang model of development, in which growth was driven by private enterprise, small family firms and specialised markets rather than by large state-owned industries or foreign investment. Wenzhou, also in Zhejiang, is the other frequently cited example. The model has been contrasted with the export-processing development of the Pearl River Delta, in which foreign-invested factories assembled imported components, and with the state-led industrialisation of the north-east. Its distinctive features in Yiwu were the role of the market itself as the organising institution, connecting thousands of small producers with buyers they could not otherwise have reached, and the role of the local government, which built and managed the market, provided infrastructure and adapted regulations, while leaving trade itself largely to private actors.
The city has also faced difficulties. Rising labour and land costs in Zhejiang have pushed some manufacturing to inland provinces and to other countries. Counterfeit goods and infringements of trademarks were a recurring problem in the market’s earlier years, and the authorities have undertaken repeated campaigns against them, with the encouragement of trading partners. The global financial crisis of 2008, the trade tensions between China and the United States from 2018, and the disruption of international travel during the pandemic of 2020 to 2022 each reduced the flow of buyers for a time. During the pandemic, when foreign merchants could not travel to China, the market relied heavily on agents resident in the city and on online orders, and many foreign businesses in Yiwu closed or reduced their operations. After China reopened its borders in 2023, buyers returned in large numbers, with merchants from the Middle East, Africa, Latin America and Russia particularly prominent.
The market as an institution
The history of Yiwu’s market illustrates several features of China’s reform era. It began with a local decision to permit an activity that national policy had not yet clearly sanctioned, and it grew because local officials saw in the market a source of employment and revenue and were willing to adapt rules to accommodate it. Its success rested on the commercial skills of a population that had traded on a small scale for generations, and on the dense network of small manufacturers in the surrounding region. It was transformed by China’s integration into the world economy after 2001, which brought foreign buyers and gave local firms direct access to foreign markets, and it has since adapted to online commerce, cross-border e-commerce and new transport routes. Scholars who have studied the city have stressed that its prosperity depends on its function as a meeting place, where information about prices, products and demand is exchanged and where trust between buyers and sellers is built through repeated encounters. That function, rather than any particular product or technology, is the source of its distinctive place in the trade of the modern world.
References
- Yiwu, Grokipedia
- Yiwu International Trade City, Grokipedia
- Jinhua, Grokipedia
- Yiwu–Madrid railway line, Grokipedia
- Taobao, Grokipedia
- Alibaba Group, Grokipedia
- Accessions: China – World Trade Organization
