Caixin
Sep 15, 2017 05:21 PM
POLITICS & LAW

Beijingers Bemoan Loss of Discount Shopping Amid Wave of Wholesale-Market Closures

(Beijing) — It looks like Lunar New Year has come early to Beijing, with locals scrambling for discounts at dozens of migrant-run wholesale markets scattered around the city.

But this buying frenzy has actually been triggered by the imminent closure of more than 100 markets for clothes, toys and household items by the end of the year, as the city government cracks down on migrants who have done business in the Chinese capital for decades.

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A vendor waves packaged scarfs outside Tianyi Wholesale and Retail Market on Friday, as crowds of people scramble to get bargains on the last day it is open to the public. Photo: Visual China

About 80 specialized wholesale markets have already been shuttered in the first seven months of the year, according to Beijing’s Commission for Development and Reform. The Beijing Municipal Commission of Commerce has earmarked 120 wholesale markets and 38 warehouses for closure this year as the city tries to ease congestion and population growth by discouraging the influx of migrants. But the plan may backfire, with many battle-hardened shop owners simply relocating to the capital’s fringes instead of packing up and leaving.

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Stall owners shout out at the crowd to peddle their goods outside Tianyi Market on Friday, the last day it was open for business. Photo: Visual China

“I’ve sold ribbons in Beijing for nearly 20 years, and I don’t plan to give up now,” said a stall owner at Tianyi Wholesale and Retail Market, who gave only his surname, Yin. Tianyi Market, with over 4,000 stalls spanning 11,000 square meters (2.7 acres), is Beijing’s largest small-commodities wholesale market. It’s known for cheap trinkets, spring festival decorations, kitchenware and even Halloween costumes. Customers were seen carting away black garbage bags full of goods from clearance sales in the weeks ahead of Sept. 15 — its last day of operation.

“I haven’t found a new shop yet,” Yin said. “But my clients are here so I won’t go back,” added the native of East China’s Zhejiang province.

Several stall owners interviewed by Caixin echoed a similar sentiment. Although it will be difficult to find another central location like Tianyi in Fuchengmen, just 8 kilometers (5 miles) northwest of downtown Beijing, many said they will try to relocate within city limits.

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Thousands of people on Tuesday crowd into Tianyi Market in its last week of operation. Photo: Raffaele Huang Ruohong/Caixin

“We’ve been busy with clearance sales since July, and will search for a new place once we wrap up here,” said a woman surnamed Dai from Anhui province. Dai has been selling agate and aquamarine necklaces at Tianyi for nearly a decade.

Li Xiang from Sichuan province, who sells trinkets that include fortune cats, also said she was determined to stay despite a wave of wholesale-market closures in Beijing in recent years.

The start of this trend can be traced back to a municipal-government circular issued in 2007 that advocated the relocation of wholesale markets from downtown areas to the edge of the city, beyond Fourth Ring Road, to ease traffic woes and overcrowding in central Beijing.

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Cui Yonghai, 53, from Liaoning province, has a 3-square-meter stall in which he sells tea sets. Cui hawks his discounted products on Tuesday using an on-ear microphone. Photo: Raffaele Huang Ruohong/Caixin

But the initiative picked up steam after the Communist Party’s Politburo announced in 2015 an ambitious plan for the coordinated development of Beijing and the surrounding Hebei province and Tianjin municipality. The new megapolis, known as the Jing-Jin-Ji area, is expected to be six times the size of metropolitan New York, and include nearly 10% of China’s population.

Beijing had cleared 302 wholesale markets and 51 logistics centers in total in 2015 and 2016, data from the municipal government showed. Some of them have relocated to neighboring Hebei province. According to data from the Hebei Provincial Department of Commerce, the province will host 28 wholesale markets that were moved from Beijing this year.

Wang Shaozhu, 35, from the city of Shijiazhuang in Hebei, has been selling replicas of popular paintings for years at Tianyi. He is among a few sellers interviewed by Caixin who were willing to move out of Beijing.

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A female customer buys three paintings from a stall at Tianyi Market on Tuesday. Photo: Raffaele Huang Ruohong/Caixin

“The main bread-and-butter for sellers in these markets is their wholesale business,” Wang said. “They supply in bulk for export orders and orders from other parts of China. They usually keep a minimum 50% margin. If you’ve done business in Tianyi for a decade, you can roughly make about 500 million yuan ($76.3 million) in profit on average over that period.”

Tax revenues collected by the government hinted at the large trade volumes at Beijing’s wholesale markets. For example, Dahongmen clothing wholesale market in the north of Beijing — also slated for closure at the end of this year — recorded 50 billion yuan in total revenue in 2013, according to data from the government office managing the market.

“Many of these sellers have already made their money,” Wang said. “They can afford to move to a pricier place in the city.”

Wang said he will no longer be work as a wholesaler after moving back home. “I’m still thinking about my next step,” he added.

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A festival-supplies saleswoman tidies up her stall at Tianyi Market on Tuesday. Photo: Raffaele Huang Ruohong/Caixin

Battle for Compensation

Closing Beijing’s wholesale markets have been a slow and painful process for both sellers and authorities. One major issue is the lack of a common standard for compensation, with authorities that manage individual markets left to negotiate the details with stall owners.

At Tianyi, sellers have been promised four times the deposit they paid for their stores as compensation, according to a government notice. Those who have paid their deposit late will get twice the amount. In July, officials conducted a survey to see whether sellers agreed to the amount. The management at Tianyi also stopped charging rent as of June 25, asking tenants to clear their inventory by Sept. 15.

“The compensation proposed by the management is reasonable, at least compared with the situation at other wholesale markets, so many of us agreed with them,” said Cui Yonghai, a tenant of Tianyi Market, who sells Chinese tea sets and items used to improve feng shui in homes and offices. “We all understand Tianyi will be closed sooner or later.”

But Cui added that he hasn’t received the compensation money yet.

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Two women at Tianyi Market shop Tuesday for red envelopes, or “hongbao,” which are traditionally used when giving cash gifts on certain Chinese holidays and special occasions. Photo: Raffaele Huang Ruohong/Caixin

In late June, over 100 shopkeepers at the Beijing Wholesale Zoo Market held a rare street protest against what they called “unfair compensation.” Several sections of the popular market for clothes, a stone’s throw away from the Beijing Zoo, are expected to close on Oct. 6.

Another protest was staged on Thursday after months of negotiations. A seller named Li Leqin said they were in the peak shopping season and have stocked up their warehouses already. “The sudden closure will cause a huge loss,” she said. The management said it would pay 60,000 yuan as compensation, but sellers said that is barely enough to cover their losses.

The Zoo Market covers 0.8 square kilometers (198 acres) with 130,000 stalls in 12 malls. More than 20,000 tenants at the market who paid around 60 million yuan in taxes per year are asking why the local government is pushing them out.

But the Xicheng district government said it costs about 100 million yuan per year to deal with traffic jams and environment problems in the area, partly caused by the market.

Beijing’s nominal population of 23 million is in reality far larger, as judged by proxy figures such as the use of public transportation. Population quotas are being issued district by district, motivating local officials to clear out their neighborhoods.

In 2014, the local government in Xicheng set up an office exclusively for the clearing, relocation and upgrading of so-called low-end business, such as wholesale markets in the area.

It is planning to turn the Tianyi Market complex into a hub for high-tech businesses, said Li Yunwei, associate head of the office.

Some former Tianyi tenants will shift their business to Tianjin and Hebei, the office said. Sellers will also be trained on selling online.

But the closure of wholesale markets that have served as the last bastions for affordable shopping is affecting Beijingers, who have been pushed into air-conditioned malls selling branded goods at high prices.

A woman from the Inner Mongolia autonomous region, who identified herself only as Tian, was sitting on two large garbage bags full of shopping near the entrance to Tianyi on Tuesday. She had spent 2,000 yuan in a day.

“I heard from friends that the market was closing and rushed in to look for a last-minute bargain,” she said. “I bought two duvets. In other places, each would cost me over 1,000 yuan, but here, it was only 400 yuan.”

A regular customer at Tianyi who only gave her surname, Gao, said she came there every year to buy items for her do-it-yourself art projects.

“I am disappointed the market will close,” she said. “It’s difficult to find such variety and bargains, even online.”

Contact reporter Poornima Weerasekara (poornima@caixin.com)

Note: This report has been corrected to show that  Dahongmen clothing wholesale market recorded 50 billion yuan in total revenue in 2013, according to data from the government office managing the market. An earlier version said "Dahongmen clothing wholesale market paid 50 billion yuan in taxes in 2013."

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