For the past two decades, John Kashani has been buying cheap goods from Chinese factories and exporting them to the US. Now he wants to sell made-in-the-US goods in China, and to do it from Yiwu, a provincial city that has become a shop window to the world for Chinese manufacturers and one of the country’s main export hubs.
Mr Kashani is vice-president of California-based Concord Enterprises, one of the largest distributors to discount “dollar stores” in the US. Apart from buying cheap Chinese goods, Concord also sources from clearance sales by large US retailers such as Wal-Mart and ships those unsold products to 33 countries, including Mexico and Chile.
As the quality and safety of Chinese-made products are questioned, Mr Kashani sees an opportunity to enter China by picking out the US-made goods he sources from Wal-Mart – from chocolates to toilet cleaners – and selling them to a growing Chinese middle class with its own quality concerns about Chinese goods.
“We can compete with China,” Mr Kashani says. “Not as far as price, but for those people who want to get quality, US-made merchandise. We can sell to them [at a higher price].”
The price differential between such clearance items and Chinese-made goods is smaller than one might imagine. Mr Kashani says the unit price for a 500ml bottle of Chinese-made shampoo, for example, is 49 cents, while he is selling his US-made shampoo in China for 69 cents a bottle.
Helping to narrow this price gap are an appreciating renminbi and the largely one-way flow of goods across the Pacific Ocean.
China shipped $287.8bn (£141.9bn, €196.6bn) worth of goods to the US last year, while US exports to China totalled just $55.2bn, according to US statistics. What this means for Mr Kashani is that while shipping one container from China to the US costs $3,000, going the other way – a trip many container ships are normally forced to make with empty containers – costs only $900.
Lacking large China sales teams and distribution channels, Mr Kashani is part of a group of small American companies – including Californian wineries and makers of environmental products in Tennessee – who are setting up shop in Yiwu, a wholesale distribution centre in the Yangtze River delta.
Mr Kashani and about 30 other US companies will be displaying their wares at the American Merchandise Center in Yiwu, a 120,000 sq ft showroom space.
The centre is the first exhibition area in China dedicated exclusively to US-made products and is a joint project between the Yiwu municipal government and Bid8, a US-based company.
Colin Wu, Bid8’s founder and the new venture’s chief executive, says US-made products have a reputation for higher quality in China. “For Yiwu, introducing the [centre] is an effort to lift themselves from the image of being a market for cheap, shoddy goods,” says Mr Wu, a Chinese American who once worked as a translator for China’s foreign ministry.
Yiwu, three hours’ drive south of Shanghai, is home to one of the world’s largest markets for light manufactured goods. Nearly 60,000 Chinese suppliers display wares ranging from teacups to Christmas trees to foreign buyers in nine buildings.
The goal of the new American Merchandise Center is to open the Chinese market to companies that do not have the resources of the multinationals.
Among the US companies is Wilson Creek, a southern California winery that produces about 650,000 bottles annually. Wilson Creek has seen opportunity in China for years, but has been unable to make inroads, says Chuck Spiegel, a director. “There’s over a billion people in China, but not a lot of good Californian wine is sold here.” So Wilson Creek is joining several other wineries in opening a wine-tasting area at the American Merchandise Center.
Not everything has gone smoothly for the US companies. Having flown to Yiwu for an October trade fair, Wilson Creek and other winemakers discovered their stock had been held up by customs officials in Shanghai, as had Mr Kashani’s dollar-store merchandise.
“The Chinese customs are very good at sending goods out of the country,” says Mr Kashani. “They’re not so good at getting goods in.”
