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Every day is Christmas Day in Yiwu, and especially in the height of summer, when temperatures soar into the 30s.
In Wang Qiaoling's store, model Father Christmases line the shelves, crowd the floors and scale the walls. Everywhere you turn, you see him: climbing down a chimney, rocking in a chair and rattling along on his sleigh. Sometimes just a few centimetres high, sometimes 1.5m tall, he is skating, parachuting, doing the twist and brandishing a frying pan – simultaneously belting out carols and jingling all the way.
This incongruous Santafest is our doing. Half of Europe's Christmas products are made in or traded through this eastern Chinese city, say officials; even more of America's. To ensure they are shipped to stores in time, western buyers arrive between June and August.
International Trade City – a gargantuan wholesale market selling everything from buttons to golf bags – should be bustling. But walk down the long aisles of Christmas outlets, past the fibre optic trees and boxes of baubles, and you hear a chorus of the same complaints: too few customers, spending too little.
Analysts hope the Chinese economy has turned the corner and predict the country is on course to hit its ambitious 8% growth target. According to the National Bureau of Statistics, annual GDP growth rose from 6.1% in the first quarter to 7.9% in the second – well above predictions. But that is largely thanks to the stimulus package and this week new figures showed a lower than expected rise in output and more bad news on exports.
Until last November, exports had not fallen for seven years. Since then, they have tumbled nine months in a row – even with the aid of tax rebates. In July they slid 23% year-on-year, compared with May's 26% drop and June's 21.4%.
Heady days
"Although we are seeing signs that a pick-up might happen in the US economy, it certainly seems that China is not going to return to the heady days of 20% export growth a year," said Tom Miller of the Beijing-based economic consultancy Dragonomics.
"From 2003 to 2007, exports accounted for about 2.5 percentage points of average 10% growth annually. That has been wiped out and it will have to come from somewhere else."
The global downturn was the last straw for many exporters, already struggling with rising costs – especially higher wages – and the appreciating yuan. And it has hit the Christmas industry particularly hard. Its customers are primarily European and American; its goods are hardly essentials; and – unlike clothes or air conditioners – nativity scenes are just not that easy to sell to Asian neighbours instead.
In Wang's store, a toy Santa croons the song Last Christmas into his gold microphone. His vendor is feeling equally nostalgic; it's the worst year for business since the Yule Sun Christmas Toys Company was founded 10 years ago. Usually it sells goods worth 12m yuan (£1m) annually, but this year it will be closer to 7m yuan. The factory has laid off 40 of its 100 workers.
"Because of the economic crisis, we have taken a big hit," she said. "Many of the items bought by Europeans and Americans last year didn't sell out. So when they came to shop this year they bought comparatively less and they were very cautious. They feared that they couldn't sell all of the goods in this climate."
But manufacturers are fighting back with the same entrepreneurial spirit that made them seize on a foreign holiday such as Christmas in the first place. Last year, about 40% of Wang's buyers were European or American while 60% were Russian. Now it is more like a 10/90 split and she is training her sights on more Russians. Father Christmas has ceded shelf-space to a new range of blonde Snow Maidens in fur-trimmed robes.
At the Yiwu Spaceflight Craftwork Company – despite its name, the firm is a Christmas specialist – boss Huang Yiming tells a similar tale. Last year, the firm sold about $10m worth of Christmas decorations to more than 50 countries, but the bulk of its customers have always been European and North American.
Now South America is its biggest client and it is diversifying a 10,000-strong product line to include Valentine's Day hearts, Easter bunnies and Halloween monster masks.
The firm hopes quality and innovation will see it through the worst; many manufacturers that collapsed were vulnerable because of their low-cost, low-margin model.
"Places like Yiwu need to be transformed anyway. I think they realise it and are changing already," said Li Jian, a researcher at the Chinese Academy of International Trade and Economic Cooperation.
"Developing only by increasing the scale of factories or production is not enough, because many other countries with lower costs are coming up. They need to change their products to better quality ones."
Domestic efforts
Others – like Song Fengming, a professor of international trade at Tsinghua University – argue that China's age of export reliance is over, in any case. "Developing new markets overseas will be no easier than developing our domestic market," he said.
But while officials have long stressed the need to increase domestic consumption, progress is slow.
"The government is pumping money in rather than making the structural shift needed," said Dragonomics' Miller. "People simply don't have the kind of spending power needed."
Many firms will struggle to switch to local markets. Some have export-only production licences. Others face tough competition from well-established rivals. Christmas manufacturers in Yiwu have the daunting task of muscling into the crowded Chinese New Year sector – or selling a largely alien festival to their compatriots.
Huang is embracing that challenge with enthusiasm. He spotted a niche for festive goods in China some years ago, and realised he could produce them when the western rush was over and his factory would otherwise lie idle. Now he hopes to persuade more Chinese people to deck their halls this December.
"General sales will decline, and especially foreign trade, by about 20%. But we will do our best to make that up in domestic custom," he pledged.
"Christmas is becoming more common here and young people like it a lot."
Additional research by Cui Zheng and Chen Shi
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