This winter is particularly cold for Tang Qijun, a gift seller in Yiwu's International Commodity Market.

The 32-year-old is one of many who usually cash in on the Christmas season. But the global economic slowdown put a damper on the holiday in 2008 .

"Christmas orders from Europe and the US are down by more than a third," said Tang.

"The holiday season is not as cheerful as before. The financial crisis forced Western families to cut back spending this past Christmas. We hope the domestic market performs better in the coming Chinese Spring Festival," he said.

Yiwu's tens of thousands of small shops supply a significant chunk of the world's inexpensive, small commodities, making the city, in the eastern province of Zhejiang, an international supermarket of sorts.

The drop in global orders comes on top of the appreciating yuan and rising labor and raw material costs, hitting export-oriented Chinese cities such as Yiwu hard.

National exports dropped 2.2 percent to US$114.99 billion in November, the first monthly decline in seven years, according to figures from China Customs.

Yiwu's busy season runs from June to October, as big foreign toy companies place Christmas orders months in advance, said Lou Qijun, chairman of Zhejiang Yiwu Qiling Toys Co Ltd.

"It is a pity we didn't see the normal rush of orders," he said.

Yiwu toy producers usually get their most lucrative foreign orders at Guangzhou's biannual Canton Fair, China's biggest trade show. But this November Lou returned nearly empty-handed.

"Our market suddenly dropped," said Tang.

The Yiwu Small-Commodity Index, compiled by operators of several small-commodity markets in the city, dipped 10.77 percent year-on-year to a two-year low of 1,035.82 points in November.

Yiwu merchants are now looking for salvation in domestic orders. "Since exports aren't bringing profits, many are trying to tap the domestic market," said Tong Yuanzhi, secretary-general of the Yiwu Toy Industry Association.

Domestic orders increased this past year and now account for 30 percent of Yiwu companies' total sales, according to Tong.

"China's toy market has huge potential. The annual average expenditure on toys for a child is US$100 in the US, but in China it's only 30 yuan (US$4.36). The international average is 100 yuan. If Chinese spent the international average, toy sales in China would jump from the current 10 billion yuan to 30 billion yuan," said Tong.

Yiwu merchants are targeting the affluent Yangtze River Delta (Jiangsu, Zhejiang and Shanghai) in particular.

Yiwu is conveniently located for distributing to this area.

Some merchants are even developing their own brands.

"We want to sell goods with our own brand. We have over 200 counters in first-class department stores and 1,500 distributors in supermarkets in major cities, such as Beijing, Shanghai and Guangzhou," said Huang Hefang, sales manager of Yiwu Hangxin Toys Factory.

Yiwu merchants are also eyeing emerging overseas markets, such as Russia, the Middle East and Eastern Europe, where consumption remains relatively robust.

"Our orders at this year's Canton Fair mostly came from Russia and the Ukraine," said Lou of Yiwu Qiling Toys Co Ltd.

He estimates the Russian market now accounts for 30 percent of Yiwu's gift exports.

"We have to revalue previously ignored developing markets to survive the economic slowdown. Fresh faces from Africa, Latin America, India and Russia may be the boost our market needs," he said.

(China Daily January 5, 2009)