China's wholesale market: Christmas starts here...

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Yiwu boasts the world's biggest market with 62,000 stalls, sprawled across 4 million square metres, selling 320,000 products to 200 countries. Clifford Coonan is spoilt for choice

If you were casting around for a place that encapsulates China's galloping economic power in a single gigantic image, you could do worse than head for Yiwu: a Chinese city on the central eastern coast founded more than 2,000 years ago which has produced a long roster of Chinese heroes – including the first Chinese to translate The Communist Manifesto – but whose importance today is based on the fact that it hosts the biggest wholesale market in the world.

When England supporters travel to South Africa next year for the World Cup, it's a fair bet that a lot of what they take with them – from the socks on their feet, to the big foam hands they are waving, to the silly hats, the giant jersey-wearing mascots, even the rings in their pierced navels – will have come from the markets of Yiwu.

Here in Yiwu, Tom and Jerry, the Pink Panther and Yosemite Sam jostle with football accoutrements at one of the 62,000 stalls. China is a nation of factories, and Yiwu, more than any other place, is where their gigantic production is disgorged.

To your left: artificial flowers, toys, fashion jewellery, hair accessories, jewellery fittings, arts and crafts.

To your right: photograph frames, crystal, and buckets and spades in lurid reds and yellows. This is where Father Christmas comes to shop, particularly in a recession when money is tight and the generous old gent has to tighten his already straining belt.

"You need to come up with different products, to make sure they are popular in all kinds of difficult markets," says one stallholder, Jin Fang, cheerfully embracing a huge World Cup teddy bear.

The Yiwu wholesale market is the public face of the greatest experiment in mass production ever seen, hawking, for example, the output of the world's five biggest sock manufacturers and its largest zip factory.

This market has everything.

There are 320,000 different commodities on sale, which fit into more than 1,500 categories and 34 industries. They are concentrated in four wholesale markets that feature more than four million square metres of selling space and ship to more than 200 countries.

Everything is about wholesale, cash on delivery, and bringing the cheap goods from China's factories to the markets of the world.

The city mayor, Li Xuhang, has pointed out that if you gave each supplier three minutes during an average eight hours of doing business, you would need over a year to get around the market.

The global downturn initially hit producers here hard, as confidence in the overall world economy flagged. At the city's annual fair in October last year, instead of orders swelling by the staggering rates of between 10 and 15 per cent that the city's business community had become used to, they dropped by 3.2 per cent.

But an ebullient Ms Jin, surrounded by stuffed animals, is confident that business is returning to Yiwu.

"The Pink Panther always sells well in Japan, even in a downturn," she burbles, "as does Super Mario and things like these cartoon photograph holders". She gives the World Cup mascot a squeeze. "You've got to keep an eye on the future."

Even the needs of niche consumers such as piercing enthusiasts are taken care of in Yiwu. Yan Yang is busily arranging the studs on a glistening display of glossy black-metal, piercing ornaments, aligned to catch the eye of the foreign visitor.

"Business is good, better than last year," she says, as she wraps some fearsome-looking body ornaments. The company sells studs, chains and rings of every description. "

Above the entrance of one stall a sign reads "Credit Booth". This does not mean that the stall accepts credit, but rather that it has received a seal of approval from the local government. Yiwu's traders prefer cash, as the crisis has seen an increase in the numbers of people defaulting on loans and no one wants to chase bad money across the world.

Go up a floor and you have got bags, wallets, hardware, kitchenware, bikes, watches, clocks, locks and home appliances.

In the hair ornaments section, things are busy. Li Jundao of the Jundao Ornaments Company is seeing signs that things are getting better. He is surrounded by more hairbands than you ever thought existed.

"The first six months of last year were bad, but it's now getting better," he says as he rummages among his wares. "These are all made in our factory near Yiwu, which employs about 100 people. We do several million of these a year. One pack costs four mao (or "feathers", which is one tenth of a yuan and worth less than four pence), and we do many millions a year, depending on how the orders are going. Our customers are in China, but also the Middle East, Europe and Africa. It's much better than in the first half."

The slump in demand from abroad has been compensated by a surging domestic market – at least that's the theory, backed by the four-trillion-yuan (£370bn) stimulus plan with which the government is striving to stoke the economy. The main drivers are infrastructure investment, strong auto sales, and a rebound in housing sales and construction.

Consumer demand, by contrast, remains relatively weak. But that's relative. Money is still pouring in to Yiwu, and products flying out.

International sales have been weak for some time – exports in August fell 23.4 per cent from a year earlier, a sharper drop than expected, and steeper than the 23 per cent fall in July, as global demand remained weak – but the market's frenzy shows no sign of abating.

Yiwu shares certain characteristics with Shenzhen in the south: everyone here is an immigrant, and the lingua franca is Mandarin, rather than the local Zhejiang dialect. And there are remarkably few old people around – the streets are filled with young people who have come to Yiwu to be part of the great hustle that is the city's founding principle.

Zhejiang province, where Yiwu is located, is China's richest and both its rural and urban residents have the highest per capita income of any province in China.

Sixty years after the birth of the People's Republic, in the city where the Chinese translation of The Communist Manifesto originated, Yiwu's freewheeling markets leave no doubt that capitalism has sunk deep roots here. This is capitalism in the raw, a Chinese version of how the visionary economist Adam Smith might have seen it – there is a street full of shops selling scarves and shawls called Scarf Street, for belts there is Belt Street, while the stalls lining Photograph Frames Street are also no surprise. Yet this remains capitalism with Chinese characteristics: the long arm of the state is palpable in the tight way in which the market is monitored.

Traders come from everywhere to live in Yiwu. More than 20,000 Muslim immigrants have settled in the area over the past five years, from Syria, Iran, Yemen, Egypt and Libya, and about 1,000 from Iraq.

Jamal Flaieh, from Jordan, exports Chinese products all over the world. "I was the first to set up an Arabic company here 10 years ago, back when this place was just a small town," Mr Flaieh says, fingering his BMW key ring and giving me the card for his Red Sea International Trading Co business.

"I've seen so many changes taking place in front of my eyes. There are people from every country in the world in this town, and they export to everywhere. Everything you see here was built in the last five years."

Yet he is pessimistic: rising labour costs have hit the competitiveness of local companies, he reports, and now he is looking around for even cheaper places to source the products he wants to sell. Vietnam is one possibility that has caught his eye.

But it would be a brave trader who argued that Yiwu's hectic heyday is over. In a sign of how aggressively the authorities here are fighting the downturn, a new market extension is planned to give the market a capacity of five million square metres next year. And the tills will keep ringing.

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