Yiwu Model Penetrate the Market through Complexity: Part 2
veiw 342 The real estate development of Yiwu Model from China has been implemented in many countries, such as United Arab Emirates, Russia, Spain, and Laos. Whereas many countries, like Malaysia, Indonesia, and Singapore, refused to accept this model. Among those countries that implemented Yiwu Model, some are sucessful, some are failure, some adapted the pattern or blening technology into the model, Singapore as an example.
Dubai Dragon Mart was found in Dubai in 2004 as Chinese distribution center outside the city and is in the Free Zone. The main objective is to be the distribution center for Chinese products to export to Middle East and North Afarica countries. Companies who participate in this project was selected by Chineses goverment, while Dubai government supports in providing low rents and tax privileges. Normally import tax from Dubai is about 5 percent in most of the items and natives needed to own at least 51 percent share. But company in this Dragon Mart project will be exempted 5 percent import tax and foriegner could take 100 percent share. The products sold in this project include textile and garment, food, home equipment, shoes and leather, gift and decoration. With this Yiwu model in Dubai, the main impact will fall into traders because they could not compete with Chinese products due to the lower retail prices. Most of traders are trying to order products that different from Chinese’s, which lead to higher costs of sourcing.
Sanjiang Shopping Mall, Vientiane, Laos, was found in 2007 with consist of more than thousand stores. Most of the products are from China, including cloth, bag, appliance, electronic, mobile phone, souvenir, and food. This Sanjiang Shopping Mall, providing both wholesale and retail trades, has become one of tourist attractions in Laos. This shopping center will not have any impacts to Laos’s entrepreneurs since most of Laos are agricultural basis and not many industrial productions. Moreover, the majority of Laos people are low-income, this shopping center actually provide benefit among Laos consumers since they are able to purchase variety of goods in cheap prices.
For implementing this Yuwi Model in Russia, there are three possibilities from Chinese investors in Moscow. The first project was collaborated from China and Russia to establish a large wholesale center located outside Moscow city near The Moscow Ring Road named “Russian Home” Most of the products are from China including shoes, clothing, and automotive parts. Furthermore, there is a custom benefit in terms of import tax, distribution, and financing. This project is not only allows Chinese investors, but open for Vietnamese, Azerbaijani, Armenian, and Russian investors also.
The second project was established by Chinese State Corporation, who purchased the exhibition and complex area called “Greenwood”. This area is located between Leningrad and Volokolamsk roads with covers 14,000 square meters of exhibition area and 23,000 square meters of office area. This project will focus on the traders who import and sourcing products from Chinese manufacturers.
Finally, the third project was established from China Chengtong Development Group called “Greenwood International Trade Center” with the sponsor from Chinese Chamber of Commerce in Russia. This project has been successful developed by 70 percent and covered 200,000 square meters total with about 132,600 square meters of office area. And most of the products under this project will be “Made in China” items.
The impact for Russian entrepreneurs will be similar to the Dragon Mart project in Dubai as it will cut down the native traders’ distribution channels and open the Chinese’s distribution. This impact will force Russian traders to seek products from other sources (beside China), which will have higher costs.
China Industrial Zone is Chinese distribution in Spain, which the merchandises will be imported by shipping through Barcelona port located in the Northeast of Spain. This center is the largest wholesale and retail distribution center that has been operated for 3 years. 80 percent of the products are from China and have been distributed to consumers or local retailers who need to buy from the center directly and pay in cash. Normally, this center will not allow outsiders, except Sunday and not allow imitated or copied products.
The advantage of this distribution center is to allow customers to purchase variety products with the cheap price. Also, it will create new jobs for local. However, Spanish traders will not able to compete with Chinese traders in this distribution center since they could provide cheaper items and furthermore, consumers prefer to buy products from them.
Singapore International Product Wholesale Mart (SIPWM) The Chinese investors were trying to implement Yuwi Model into Singapore, but Singapore government refused and prohibited the establishing of this distribution center because Singapore government believes it will provide negative impact to Singapore businesses and consumers. However, Chinese and Singapore investors were developed the new distribution center by leasing “Asia-Singapore International EXPO”, where is the largest conference and exhibition center in Southeast Asia for 2 years.
In this Singapore case, the impact will occur to Chinese product traders since they could not compete with prices. Nevertheless, there will be no impact to industrial products because there is no manufacturer in Singapore. This center also allows Singaporeans to buy variety cheap products. But most of them not prefer Chinese products.
Next chapter will present implementing Yuwi Model in Thailand and the impacts in terms of trading and production.
Reference: Exporter Magazine, September 2011
