Buyers make their purchases observing safety measures at the Yiwu International Trade City in Yiwu, Zhejiang Province, on April 9 (XINHUA)
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
Trucks queue up at the logistics transfer station of Yiwu Port in Hangzhou, Zhejiang Province in east China, on March 7 (XINHUA)
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.
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 12-13 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 hundreds of short video clips showcasing its products in government projects, hotels and hospitals worldwide. The videos are customized for clients in various countries and promoted locally.
Liu said he has received positive feedback on the multimedia promotion campaign. Though he could not link the video viewership directly to the orders placed, he said more potential clients have got to know about his products this way. That was exactly the effect his company intended to achieve. "In a crisis lie opportunities," he said.
He regards the current trend that people go online and use mobile phones as a silver lining and recommends that companies upgrade their ways of communication accordingly. Now he is preparing for a new product launch through WhatsApp, a social media which while little known in China, where WeChat reigns, is popular outside.
But despite the new campaign, the total 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 two-month rent waiver can enable his company to run for 10 days. However, companies should rely mainly on their own efforts.
According to the latest data, China's foreign trade in goods inched down 0.7 percent year on year in April, narrowing from a drop of 6.4 percent in the first quarter, with exports rising 8.2 percent from the same period last year.
However, MOFCOM officials said days ago that foreign trade is still under considerable downward pressure despite improvement in April trade data.
Hong suggests the companies should have faith, be on alert for risks amid the global crisis, and get used to the new normal of dealing with the virus.
For small business owners like Wang, things seem to be looking up. Although little has changed on the accounting sheet as of mid-May, he has seen more inquiries recently. Delivery of his company's products to some countries previously on lockdown has also resumed.
Wang thinks by offering medical help and funding to many countries during the pandemic, the government is making more people in the world learn about China and its products, which would help to shore up trade after the pandemic is brought under control globally.
Also, he is looking forward to the China Import and Export Fair in mid-June to bring him more business. The oldest trade fair in China held twice a year in the bustling trade city of Guangzhou in south Guangdong Province will be held online this summer, the first time since it was launched in 1957.
Until then, he is encouraging himself and other MSMEs to concentrate on staying afloat, following the dictum: "Survive, and all will be well."
This is an edited excerpt of an article published in China.org.cn
(Print Edition Title: Export Barometer Seeks Rebound)
Copyedited by Sudeshna Sarkar
Comments to firstname.lastname@example.org