(*The authors’ opinions expressed in this article do not represent the position of FLIA or FLIA’s research team.)
Establishing a Foreign Trade Business in Yiwu
— An Option for Africans Looking for Global Possibilities
Authors: Yuxi Zhang and Meihan Chen
“I can get whatever I need here, not in Guangzhou,” an African purchaser firmly stated when questioned about his plan to explore the Yiwu International Trade Center. He took a look at the shopping list he was holding, as if he was bound by something, saying, “you know, I can easily earn money here, and I can probably get all the goods I need in this trading city. The clients are delighted with Yiwu goods.” He is in charge of locating resources in the Yiwu Market that would meet the needs of African merchants.
Despite being a county-level city, Yiwu is China’s capital of petty commodities. Its International Trade Center now boasts 6.4 million square meters of space, 75,000 booths, 26 categories, over 2.1 million unique items, and a 65 percent export-oriented degree. It currently conducts business in 233 nations and areas throughout the world. China central television identifies Yiwu as the birthplace of the “Belt and Road Initiative”. It is also the starting point for Trans-Eurasia Logistics.
This is International Trade Market in Yiwu, where various resources are available
Yiwu’s industrial chain consolidates the city’s position as an international trade city. This whole process has been enhanced over time, from the acquisition of raw materials to machining, packaging, and transportation. The adequate supply of Yiwu petty goods and the development of the African market contribute to the rising demand for commodities.
Since 2007, an increasing number of African merchants have opted to establish an import channel from Yiwu. Africa has emerged as one of Yiwu’s major exporting destinations as the China-Africa trade develops. According to Yiwu Customs, the overall cost of items shipped to Africa in the first half of 2021 topped $34.75 billion, with a $3.75 billion yearly inflow.
Is establishing a foreign trade corporation in Yiwu difficult?
Starting a foreign trade corporation is the first choice of many Africans who want to launch a startup in China. Foreign trade companies are intermediaries in charge of sourcing factories, quality control, logistical arrangements, shipping, declaration, tax rebates, dispute resolutions, and other processes. They are asset-light firms whose values reflect in their service for their customers and suppliers. It requires little capital and few preparations to initiate. Trade corporations are well-informed of resources distribution in Yiwu; as a result, they are capable of offering customers goods that achieve diversity, low prices, and guaranteed quality.
Previously, collaborating with a Chinese partner was required for foreigners who want to establish foreign trade corporation in Yiwu. Since 2010, with the innovation of policy, a Chinese partner is no longer necessary.
Apart from the low capital requirements, professional knowledge is not requisite for setting up a foreign trade corporation. Foreign entrepreneurs will be able to locate reliable suppliers, trustworthy customers and finish the transaction as long as they are diligent in expanding business. For example, there are representatives of foreign trade firms seeking appropriate resources among the numerous pedlars in the Yiwu International Trade Center. Price differences and product quality are things they primarily focus on.
There are numerous petty commodities in Yiwu International Trade Market
For Africans who want to launch a startup in Yiwu, their personal skills will offer additional advantages to a foreign trade corporation. Speaking Chinese, gaining clients, effective communication, and cultural recognition are examples of personal skills that help a trade business approach its full potential.
Don’t worry if you don’t understand a word of Chinese!
The Yiwu government offers courses to help foreigners learn Chinese in a short period. As the personal skills of employees achieve advancement, the foreign trade corporation will be capable of better accommodating the local environment and offering convenience throughout the international trade operation.
Furthermore, extra supporting services in Yiwu can help Africans build their trade corporation. During an interview with Bashar, a Syrian online celebrity, Bashar mentioned, “I have a friend who worked for a consulting company. Later, he started his own consulting company named SIKAI and offers foreigners info about setting up a foreign trade corporation.” Consulting companies such as SIKAI offer new coming foreigners added convenience and make the establishment of a foreign trade corporation more feasible. They provide newcomers with all types of information, including export right agency, company registration, management consulting, trademark registration, etc. In this way, the time and energy consumption of establishing a foreign trade corporation would be significantly shortened.
To facilitate international trade, the Yiwu government has implemented various unique policies
The government of Yiwu has been leading the establishment of foreign Chambers of Commerce, which provide forums for market information exchange and business partnership formation. For example, the Yiwu China-Africa Chamber of Commerce was initiated by the Yiwu government on January 8th, 2020. Currently, over 100 Chinese and African firms have joined the organization, and they collaborate.
Aside from establishing international Chambers of Commerce, the Yiwu government cares about the experience of African purchasers in Yiwu International Trade City as well. The bilingual Yiwugo App, created by the government, is the official website of the Trade City. The app connects foreign purchasers with stores in the Trade City, providing them with controllable, credible, and traceable transaction guarantees. Yiwugo shows the location of every store in the Trade City, logistics information, guidance on the purchase process, etc. “It’s tough to figure out what is there, but with the app, I can get all the information I need; it makes my life much easier!” said an African tourist.
In addition to the above two initiatives, the government also conducts many exhibitions so that more foreign purchasers learn about Yiwu petty commodities. For instance, China Yiwu International Commodities Fair, founded in 1995, is conducted every year from October 21st to 25th for 26 consecutive sessions. It is one of China’s three main export exhibitions. The government supports local enterprises in organizing as well. Foreign purchasers can directly interact with excellent businesses from many categories at exhibitions and view companies’ latest goods. Mr. Bi, a professional event organizer, proudly introduced, “Our photo frame exhibition is the world’s largest and most specialized. In this area, it outperforms the US, Italy, and other countries.” Moreover, he gratefully said, “the government has given us much help; they provide subsidies for the first five years, allowing us to offer greater services to foreign purchasers.”
Despite all the benefits of establishing international trade businesses in Yiwu after the pandemic, foreign trade companies will still face many challenges. There is a slight chance that purchasers might encounter “fake products” and “fake Chinese businessmen” during work. For example, some merchants once received inferior goods imported by international trading firms. Others had clients who failed to pay and disappeared after receiving items. Locating those people can be very hard for foreign trade companies.
Currency exchange may also be a challenge for them. Fluctuating exchange rate poses uncertainties on traders’ profits. Besides, freezing of the bank account due to the inflow of unknown illicit money may cause significant trouble. “We do not know where the money comes from. We have no solution for the frozen accounts. There is no choice but to wait. And sometimes we have to pay a forfeit to get our money back,” said Bashar, a Syrian merchant. “My African friend’s bank account has been frozen with 800,000 RMB locked.”
Despite the challenges, starting a business in China is an opportunity one should not miss
The Chinese government’s “Belt and Road Initiative,” a global infrastructure-building initiative, is accelerating China-Africa commerce from multiple angles. To begin with, increased use of transportation routes benefits the logistics business. It hastens the strengthening of the connection between China and neighboring nations and the formation of regional transportation integration. The “Peace Cable” project is a 12,000-kilometer undersea cable from China to Pakistan and Eastern Africa. Another route, via the Arabian Sea, connects the Red Sea with southern Africa. The other branch, known as the “Maritime Silk Road,” enters the Mediterranean from the Red Sea and terminates in Marseilles, France. Its function is to establish data communication between China, Africa, and Europe.
In addition, infrastructure building in nations along the “Belt and Road” is a factor in demand. Due to financial restrictions, the countries along the “Belt and Road” are insufficient in infrastructure investment due to a lack of cash. Compared to China, Asian and African nations along the “Belt and Road” have 10% and 20% more space for urbanization progress, respectively. As a result of its self-urbanization development, China has amassed a considerable quantity of experience and manufacturing capacity that is now ready for export.
In contemporary society, problems are pervasive. They are solvable as long as you are persistent in coping with problems. For Africans looking for global opportunities, it would be wise to start a foreign trade business in Yiwu due to its current advantages and irreplaceable potential. Moreover, with the assistance of newly implemented policies like the “Belt and Road Initiative,” being successful in China seems around the corner.