- The Washington Times - Monday, July 21, 2008

BEIJING | Stricter visa regulations imposed by a Chinese government terrified of protests and security threats ahead of next month’s Olympic Games are hurting China’s legions of traders wholly reliant on international business for survival.

The number of business travelers entering China from overseas has been dropping since April, when most Chinese embassies and consulates ceased issuing multiple-entry business visas and began demanding details of round-trip flights, hotel bookings and often invitation letters from Chinese companies.

Many international businesspeople based in Hong Kong, and accustomed to making regular trips over the border, are being told they have to return to their home countries to submit visa applications.

The government, deeply wary of protests from overseas political groups and the threat of a terrorist attack during the games, insists the tougher measures are necessary to keep “undesirables” out of Beijing and to maintain security.

But the consequences are severe for the hordes of vendors who display their wares in the small commodities markets around eastern cities such as Yiwu, home to 1 million people and the largest wholesale market in the world.

There are about 60,000 vendors in the Yiwu market, selling all kinds of knickknacks from Christmas tree decorations to toy trucks. For them, the Olympics mean no customers.

“Business is definitely well down on last year; it’s much quieter here,” said a purchasing agent with the Yiwu China Export Agency Co.

“We have heard of many foreigners being refused visas and giving up on the process, especially those from the Middle East who make up a large percentage of our customers. We are just hoping business goes back up when the Olympics are over.”

The problem for the Chinese traders is that, while they can do deals over the Internet and telephone, they rely predominantly on face-to-face contact with international business clients looking to source products.

“Usually I spend a month in the country visiting suppliers across 10 cities. I go to giant wholesale markets like the one in Yiwu and identify five suppliers out of hundreds to do business with,” said a director of an Irish sourcing company, who did not want to give his name for fear of being refused a visa in the future.

“I need to compare prices and check [that] suppliers have the correct quality-standard certificates. But people like me just can’t do that with the visa rules as they are,” he said.

Instead, he plans to wait until Oct. 17, the end of the “Olympic period” designated by the Chinese authorities, in the hope regulations will be relaxed.

“It’s a big worry for us. If there is a flare-up during the Olympics, then things could become even tighter, and we would have to go back to the drawing board,” he said.

July and August are usually busy months for exporters in Yiwu and the nearby textiles hub of Wenzhou as Christmas orders come flooding in from overseas.

However, some Western brands are struggling to get their quality-assurance inspectors into the country to meet their corporate social-responsibility requirements, said Paul French, chief China analyst at market-research firm Access Asia.

“When you are ordering half a million leather jackets, you need someone to come and check they have two arms,” Mr. French said.

A mass of lost orders could prove fatal for China’s textile companies, two-thirds of which operate on profit margins of 1.5 percent or less.

The China Council for the Promotion of International Trade declined to comment on the impact of the visa regulations on the country’s exporters, citing “the special conditions we are facing now, especially with the Olympics so close.”

Some Western businesses could start sourcing products from other countries, such as Vietnam and Bangladesh, said Mr. French, but a permanent move away from China would prove problematic.

“Companies selling low-end products can choose to move to Vietnam, but they won’t find everything they need there. It’s very cheap of course, but China doesn’t want to compete with Vietnam in this regard anymore,” said Minggao Shen, a Beijing-based economist with Citigroup.

The harsh reality for small-time traders in Yiwu and Wenzhou is that the central government is not overly worried if some companies producing simple, labor-intensive products are forced to close, having set its sights on a more innovative, technology-based export strategy.

“The question is whether the Chinese government will help the small guys to survive. Some bankruptcies and closures are inevitable, but it’s a case of how fast and how many. As long as this process is smooth, it should not affect the economy too much,” Mr. Shen said.

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