How did a marketplace arise in the depths of Chinese communism? At the Cato Institute, James A. Dorn explains the emergence of the thriving market in Yiwu, China. He writes:

The distinguishing characteristic of Yiwu is the courage and pioneering spirit of its poor farmers who took the risk of becoming small commodity traders and entrepreneurs. As noted in Xinhua Politics, “The Yiwu Marketplace Is the People’s Creation” (December 20, 2018; see Osborne 2024: 275). In seeking to help their families survive and improve their living conditions, farmers used locally grown sugarcane to produce candy, which they exchanged for feathers that could be used as fertilizer and dusters. The so-called feather-candy men date back to the 17th century (Yiwu Market Guide).

Although small wholesale markets existed in the 1700s, the birth of the People’s Republic of China in 1949 put a halt to the emergent marketization process. As the Yiwu Market Guide notes, “no free trade was allowed.” Private traders were regarded as capitalists and were repressed by the authorities. Under the “Three No Rule,” farmers were not allowed to engage in business; industrial goods were not allowed to be sold in private, free markets; and self-employed people were not allowed to engage in wholesale trade (Rui, S16). Nevertheless, during the period of central planning (1950s–1970s), “walking traders” (xing shang) continued to operate illegally, and a “spontaneous trading market laid the foundation for the future Yiwu market” (ibid.).

The Role of Local Government Officials

Things began to change when Deng Xiaoping launched his economic reforms in December 1978. Yiwu traders took the opportunity to set up informal markets by placing their baskets on roadsides. In April 1981, the Yiwu County Industry and Commerce Bureau issued 200 temporary trading permits, and the “spontaneous market” was moved to Bei Men Street.” This was risky “because no clear permission was given by the central government” (Rui, S17).

A key turning point in the development of the Yiwu market occurred a year later, in April 1982, when the CCP appointed Xie Gaohua general secretary of Yiwu. He was sympathetic to the emergence of a free market, as he saw the success of Yiwu’s small traders. However, trade restrictions were still tight, and the tax authorities discriminated against private traders. One trader, Feng Aiqian, confronted Xie, telling him that she depended on small commodity trading to help her family and that she was not harming anyone by her actions, which were deemed socially destructive by the CCP. Xie listened carefully and then visited local farmers “to investigate the truth.” Seeing widespread poverty, he “realized that trading was indeed a major income supplement to farmers.” As a result, he “promoted the idea that ‘small commodity trading is Yiwu’s major advantage’ and supported market development.” Other members of the municipal government joined his effort to form a free market in Yiwu (Rui, S18).

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