Commodity traders hit by price rise

By Chu Daye Source:Global Times Published: 2017/9/10 22:03:39

Environmental probes seen driving up costs

A couple wait for customers at their wholesale shop in Yiwu International Trade City in Yiwu, East China's Zhejiang Province. Photo: VCG

Traders across China have expressed mixed reactions to an ongoing environmental compliance crackdown in East China's Zhejiang Province, a major manufacturing base for wholesale commodities.

The Economic Observer newspaper reported on Saturday that a whirlwind of environmental compliance crackdowns has caused "a tide of closures" of shops in massive commodity shopping complexes at Zhejiang's Yiwu city.

Yiwu is one of the biggest wholesale commodity centers in the world, serving customers from home and abroad.

Multiple sources reached by the Global Times confirmed on Sunday that there have been shop closures in the commodity centers, but they said the scale has been quite limited so far.

However, commodities traders have expressed rising concerns about the effect of the environmental inspections in Zhejiang and many other parts of China on the cost of goods, and how the move will affect foreign trade.

The ongoing fourth round of national environmental inspections dispatched by the central government has been more strict and efficient than ever, and violators are facing fines, factory closures, and even custodial sentences, according to media reports.

Nationwide, authorities have imposed fines worth a total of 280 million yuan ($43.2 million).

A consultant, who did not wish to be named, at, the online platform of Yiwu's commodity center, told the Global Times on Sunday that shop closures inside the market were related to the environmental crackdown.

A local merchant trader surnamed He, whose shop sells gift bags and paper to Europe and South America, said a small number of shops had closed due to a shortage of stock.

Chen Xiaoping, a trader who sells textile products, told the Global Times on Sunday that inspections of this magnitude are rare, and this one has caused suppliers to raise the price of cloth products sold to her by 0.1 to 0.2 yuan per meter.

Beyond Yiwu

Experts said that if a crackdown is causing small factories in Zhejiang to close en masse, it could affect related products' prices and disrupt the supply chain, with possible effects on small commodity exports, particularly as Zhejiang is the major production base for many types of commodities.

A trader surnamed Yang at the Nansantiao wholesale market in Shijiazhuang, capital of North China's Hebei Province, said he was keeping a close watch on the impact of the environmental crackdown.

Nansantiao has traditionally served as a relay station to send commodities from Yiwu to northern markets.

Yang also owns a small plant, and he sells protective gloves.

"Small-scale factories and plants usually face the brunt of crackdowns of this kind. In turn, downstream wholesalers are affected when factory-gate prices rise. If they have sufficient stock, then they are less exposed," Yang told the Global Times on Sunday.

"Export merchants are less affected than those who do domestic business only. Their higher profit margin and time-nurtured clients mean they are better able to absorb the impact of supply chain disruptions," Yang noted.

A merchant surnamed Ma in Erenhot, North China's Inner Mongolia Autonomous Region, told the Global Times on Sunday that he was feeling the pinch from the effects of environmental inspections.

Ma buys bicycles from Chinese manufacturers and sells them to Mongolian customers visiting his shop in Erenhot.

"Environmental protection checkups, factory closures, stock price hikes, higher prices of end products - these things happen like dominos," Ma noted.

He added that bike producers in East China's Shandong Province, North China's Hebei Province and Tianjin Municipality have all raised their prices starting from September.

"Added to the fact that the Mongolian currency is depreciating, it will mean reduced purchasing power for my Mongolian customers," Ma said.

"When I sell things with a slightly higher price tag due to the cost of environmental protection efforts, I can take it peacefully. It is usually my clients who cannot take it, as they are very sensitive about prices," Yang said.

"Producing goods in an environmentally friendly fashion will cost more, inevitably," Yang added.

In the long-term, his customers will accept this and live with it, but it takes time to change people's attitudes, the merchant noted.

Posted in: ECONOMY

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