Bound brick manufacturing Yiwu into a global small commodity semi-finished products export distribution center?

October 17, 2019

Overseas Merchants Increased Semi-finished Products Purchase BRIC Brick Manufacturing Yiwu Small Commodity

The BRICS countries such as India, Brazil, and Russia have performed well in Yiwu commodity exports in the first half of the year, and India has even replaced Iran as the largest market.

A number of Yiwu small commodity operators recently told the First Financial Daily that overseas merchants who had previously purchased finished products in Yiwu began to significantly increase the purchase of semi-finished products this year, among which the number of merchants in developing countries such as Southeast Asian countries and BRICS countries is most obvious.

Yiwu Toys Association, the person in charge believes that Yiwu has become the global distribution center for semi-finished products exports.

Semi-finished product export acceleration

In the first half of this year, the commodities exported by Yiwu Customs reached US$5.23 billion, an increase of 33.6% year-on-year. According to an analysis by Yiwu Customs, taking into consideration the return of a large number of goods for customs clearance, actual exports have remained flat or slightly increased compared with the same period of last year. “In the case of slowing exports, exports of semi-finished products have increased significantly.”

According to Yiwu jewelry, toys and other small commodity business households, since last year, their product sales have plummeted. This year's business is even worse, dropping by more than 30% year-on-year, and profits have also fallen by about half. Under the restriction of sales volume, increasing imports of semi-finished products and combining domestic industry to increase profit margins have become the main route for most customers to “change”.

Xu Xufei, secretary general of the Yiwu Toy Association and chairman of Cher's Toys Co., Ltd., said that the company's products are mainly exported to Latin America. In recent years, a buyer from Paraguay has significantly increased the purchase of toy semi-finished products from them. “They have domestic processing bases. As long as the imported semi-finished products are slightly processed, they can be used as domestically manufactured products, and then sold or exported to neighboring countries such as Brazil.”

Ms. Qian, who has done jewelry business for many years in Yiwu, said that more and more Southeast Asian merchants are purchasing accessories or manufacturing machines in Yiwu, which was relatively rare before. Different from the procurement of finished products in the past, some of the “purchase lists” that Southeast Asian merchants have opened this year are mostly semi-finished or product accessories. After they return the semi-finished products to China, they can sell them after simple processing.

Shami, an Indian businessman who has been exporting jewelry for many years in Yiwu, began to bypass Yiwu's finished product suppliers since last year and has been looking for related accessories manufacturers. Shami said that India's processing industry is now developing rapidly. As long as he purchases raw materials and equipment and ships it to an Indian factory for further processing, the cost can be greatly reduced.

According to the latest statistics from Yiwu Customs, in the first half of this year, Yiwu Customs exported 550 million U.S. dollars to BRICS countries, an increase of 40.5% year-on-year. Among them, India exported 280 million U.S. dollars, a year-on-year increase of 27.2%. It replaced Iran for the first time as Yiwu’s largest export market for small commodities; it exported 140 million U.S. dollars, an increase of 40.1% year-on-year.

The advantage of labor is no longer

Wang Xufei believes that Yiwu's small commodity industry cluster has obvious advantages and has formed a complete industrial support and procurement support. However, under the cost advantages such as labor force, enterprises in Southeast Asia and developing countries will increase the processing of semi-finished products and complete the final process of Yiwu's small commodities.

Wang Xufei said that Paraguay’s front-line employees have monthly wages of three to four thousand yuan, and merchants transport semi-finished products to the country for processing. “In spite of a slight increase in labor costs, the cost of semi-finished products will be reduced by half compared with finished products, plus the tax exemption policy between Latin American countries. The overall cost is lower than that of finished products."

In developing countries such as Southeast Asia, despite the existence of weak infrastructure, shortage of talented technicians, incomplete upstream and downstream industrial chains, and weak design and R&D capabilities, their low labor costs pose a strong competitive pressure on small commodities in Yiwu.

In the Indian jewelry factory, the monthly salary of first-line employees is about 1300~1600 yuan. The cost of labor in Vietnam is even lower, probably as little as 600 yuan. In Yiwu jewelry processing factory, the wages of front-line employees have reached 3,000 yuan per month, which is about twice that of India.

It is worth noting that small commodities manufacturing companies in Southeast Asia, such as India, are not only targeting the domestic market but are also seeking further international orders. They processed materials through semi-finished products and formed ** on small commodity prices in Yiwu, which in turn attracted buyers from the Middle East, Europe and the United States.

An Yiwu official said with apprehension that under the trend of rising environmental protection costs and declining labor efficiency, Yiwu’s small commodities can only sustain their global competitive advantages through innovation and upgrading.

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