Original article: “Ouzhou huaren shangcheng jingji yanjiou” (“A study on Chinese malls economy in Europe”). Shijie Minzu, 2013-3, p.53-60.
Li Minghuan is Professor at the Institute of Population Studies at Jinan University in China and a consultant at the Chinese Affairs Bureau Abroad of the State Council of China. A sociologist, she has published more than sixty articles in journals in English and Chinese on the situation of Chinese migrants in Europe and on international migration policy. She has also published two books in English on these topics. The first, drawn from her doctoral research, is entitled “We Need Two Worlds: Chinese Immigrant Associations in a Western Society”, (Amsterdam University Press, 1999). The second, “Seeing transnational: how do Chinese migrants make their dreams come true” (Leuven University Press, 2013), focuses on the transnational networks of Chinese entrepreneurs in Europe.
This article is based on the project “Ouzhou huaren yanjou” ("Research on Chinese Overseas in Europe") sponsored by the National Social Science Funding of the Chinese Government (11BMZ038). This is a pioneering article written by the Chinese specialist on these issues that offers a point of view significantly different from the one commonly carried by work done from Europe.

Introduction

1Since the beginning of the twenty-first century, due to rapid economic growth in China, the Overseas Chinese in Europe have experienced considerable transformations with respect to their demographic structure and economic power. These transformations are especially striking when considering the Chinese mall, a rapidly growing economic model within the European continent. The Chinese mall model has replaced such traditional economic niches as the Chinese restaurant, the textile workshop and the retail shop, bringing a new economic standard to Chinese communities in Europe in terms of scale and influence.

2The new Chinese market differs from the traditional “Chinatown”. Chinatowns are typically located in neighborhoods with high concentrations of Chinese residents. Although these exotic Chinatowns may attract tourists and locals, their principal function is to provide services for the ethnic Chinese who reside in the community. In contrast, the new Chinese markets aggregate hundreds or thousands of shops selling products made in China. Their principal business model is wholesale. Chinese markets have become important platforms of exchange for the entrepreneurs of the Chinese diaspora, as well as nodal points of circulation for Chinese products in Europe. In this sense, the Chinese markets are a site of direct encounters between overseas Chinese and the populations of their host societies; as such, the markets have become objects of attention among politicians, the media, and ordinary citizens. Whether the malls’ owners realize it or not, the Chinese market has become to a degree the representation of China and made-in-China products in overseas countries. For these reasons, the Chinese market is not only an economic phenomenon, but also a crucial subject of study with theoretical and practical significance.

3This article’s analysis is based on an extensive literature review and in-depth interviews with entrepreneurs via four field studies conducted between 2011 and 2012 in France, Italy, Spain, Hungary, Russia and Romania. Besides observations in local malls and interviews with the entrepreneurs, I have enriched my understanding of the issue through discussion with local scholars and political authorities.

The process of development of Chinese malls in Europe

5Before the end of 1980s, Chinese migrants’ economic activities in Europe were mainly characterized by service work such as catering, textile fabrication, leather-goods and retail. Besides exceptional cases such as the “Tang Frères” supermarket, which has become an important enterprise at the national level, most Chinese economy models only survive in the niche economy. In East European countries, the number of Overseas Chinese is even fewer. As a result, they rarely launch economic activities outside the co-ethnic market.

6Entering the 1990s, after the dissolution of the USSR, the social-economic structure in East European countries has produced extraordinary opportunities for the new Chinese migrants. This historical development has coincided with China’s rapid economic growth, a consequence of the creativity of ordinary Chinese people that emerged after China’s economic reform of 1978. As a result, the European Chinese communities’ economic model has evolved. International trading has become a newly dominant model, spreading from South-Eastern Europe to the Northern and Western part of the continent. Thanks to China’s productivity, overseas Chinese have established several, enormous commercial centers serving multiple functions (storage, wholesale, and retail at the same time). Thus emerged a new economic model, characterized by these large malls, managed by new Chinese migrants who sell products made in China.

7Since their genesis in the 1990s, Chinese malls in European cities have experienced a three-step evolution.

8The 1990s saw the emergence of the Chinese mall economy. During this period, numerous new Chinese migrants introduced low-cost Chinese products into the European market via various channels. The paths taken by these nomadic traders were diverse: several travelled to Eastern Europe and considered their practice as a “training” (liantan); some became basket vendors in Southern Europe (tilan jiaomai); and others commuted between China and Russia to sell destocked goods (daoye). The cheap and original products fabricated by local private enterprises in China found great success in Europe, especially among the lower and middle classes. Among the most successful of the earliest traders who joined the market, several rapidly opened their own wholesale shops. Driven by the effect of these “agglomeration economies”, various wholesale markets of different sizes were established in European cities. The most famous examples from the 1990s include the Four Tigers’ Market in Budapest, the “M” market at Piazza Vittorio in Rome, the Centro Mourario in Lisbon, the Sedaine-Popincourt neighborhood in Paris, as well as the Cherkízovsky rýnok market in Moscow. The common characteristics of these markets include spatial concentration, with sizeable inflows of customers and high profits based on low costs of production. Their economic principle is based on the rapidity of primitive accumulation of capital. According to a successful entrepreneur in Italy, “During this period, not a single shop owner experienced a loss of profits… At that time, it was normal to sell 400-500 containers of products per year, or 10 containers per day.” Many of the wealthiest Chinese entrepreneurs currently alive earned their very first capital during that period.

10Meanwhile, the Chinese economy contributed considerably to the economic revival of Eastern Europe. In Russia, new Chinese migrants represent the main economic pillar of various market places. They serve as an important force in the trading flows between China and Russia. In Belgrade, Serbia, the “No. 70” wholesale market is extremely prosperous, offering a range of commodities from needles to materials for interior decor. Finally, it is worth noting the examples of the Ostrava wholesale market in Czech and both the Red Dragon and the 7 Kilometer market in Odessa, Ukraine. Their expansion also includes renovation and construction of new markets.

11After the 2008 financial crisis in Europe, recession in Europe impelled the Chinese migrants’ economy to a period of transition. The third phase of the Chinese migrant economy is thus marked by adaptation and transition during these challenging times. By this point, the Chinese mall economy had developed to the point that markets paid more attention to issues of environment, hygiene and cleanliness; at the same time, the entrepreneurs involved also sought to innovate. Moreover, the Chinese mall’s spatial concentration began to produce some negative social impacts. Problems engendered by the Chinese entrepreneurs’ activities are potentially highlighted by their host country’s media, and might even provoke diplomatic troubles between China and the host country.

A Typology of Chinese malls in Europe

Table 1. Chinese malls in Europe

Country	City	Market Place	Construction Type	Investors
France	Paris	Popincourt	Neighborhood concentration in city center	Individual Chinese wholesalers
	Aubervilliers	CIFA	Newly constructed mall	French real-estate company
		Fashion Centre	Newly constructed mall	Chinese entrepreneurs
Italy	Roma	Piazza Vittorio	Neighborhood concentration	Chinese entrepreneurs
Spain	Madrid	Fuenlabrada	Recycling of industrial wasteland	Chinese entrepreneurs
Russia	Moscow	Cherkízovsky rýnok	Open-air market	Local market owner
		Luniki Stadium	Outdoor market
		Central Dynamo Stadium	Outdoor market
		Greenwood Park	Newly constructed commercial center	Joint venture between Chinese enterprise (Group Hengtong) and Moscow city hall
		Yiwu international trading center	Newly constructed commercial center	Joint venture between private Chinese groups and a Russian enterprise
Romania	Bucharest	Niro market	Open-air market	Local owner
	Bucharest	Red Dragon Market	Newly constructed center	Chinese entrepreneurs

12The most important Chinese wholesale centers in Europe currently include Aubervilliers, Popincourt in Paris 19th, and Piazza Victtorio in Rome; as well as the warehouse area near Rome airport, Fuenlabrada in Madrid, Eurosquare and the Wenzhou and Monori centers in Budapest, the Red Dragon market in Romania, and the Monori center in Moscow. As the economic environments differs between Eastern and Western Europe, the Chinese mall’s development processes are different. All in all, we can define three different development paths of Chinese wholesale markets, characterized by their type of construction.

13The first type is the open-air market. These markets often stem from a spatial concentration of Chinese entrepreneurs. These markets are mainly situated in Eastern Europe, especially in Russia. In the early 1990s, in Moscow, hundreds of open-air markets of different sizes appeared at various subway stations – and even beside national stadiums (Luniki Stadium, Central Dynamo Stadium) – thus constituting a widespread commercial network of lower and middle-range commodities. These markets are popular to entrepreneurs because of their low entry threshold and simple business model. Before September 2008, the local Chinese in Moscow used to refer to the Cherkízovsky rýnok as the “Big Ant market,” and it has since expanded to cover hundreds of hectares in Moscow. Although these markets are most often austere and unassuming – many so-called “shops” are simply abandoned containers – the daily transactions in the “ant market” can reach 50 to 60 million USD, with tens of thousands of Chinese living and working within. Another example of this kind of market is the “Huge Chinese market” in the city of Yekaterinburg, Siberia. The huge market is spread over 40,000 square meters, where the made-in-China textile products represent 95% of the local market. Of the 60,000 shops, more than 90% are Chinese. The shops are mere tin sheds and the commodities sold here are almost exclusively made in China.

14The second type of development path is seen in neighborhoods with a highly concentrated Chinese market. In the 11th arrondissement of Paris, a market was formed by traders who were principally overseas Chinese from some of the former asian French Colonies (Laos, Cambodia) and Indonesia; despite this, the neighborhood’s image is that of a traditional Chinatown, with Chinese-owned supermarkets, restaurants, travel agencies and beauty salons. This kind of neighborhood can be found in England (London and Manchester), Netherlands (Rotterdam and Amsterdam) and Spain (Madrid). Here, our study focuses on another type of economy. Whereas earlier market models were based on retail, the Chinese malls – concentrated mainly in a single neighborhood – rely on wholesale trading. Their commodities are highly concentrated (textiles or bags), especially intended for retailers themselves. The Chinese wholesale market in Europe is further characterized by its sector specializations in textile, electronic and toys. The flows of customers, traffic, commodities and capital involved in wholesale trading are of a far greater magnitude than those affecting traditional Chinatown shop owners. In this sense, the two kinds of neighborhoods are not comparable. It is a matter of scale: in Madrid, for example, more than 300 wholesale shops and 3,000 small shops are concentrated at the Chinese market at Fuenlabrada. In Paris, in the 11th arrondissement of Paris, there are 40 wholesale shops on Rue Popincourt, where there used to be 50 commercial shops. In Italy, in a neighborhood near Piazza Vittorio in Roma, more than 500 wholesale shops belonging to Chinese entrepreneurs are spread among several avenues traversing the neighborhood.

15The third type of development path involves the renovation of old warehouses or factories – or the construction of new facilities altogether – which are then divided or rented to wholesale entrepreneurs. This is especially the case at Aubervilliers, which was a defunct industrial neighborhood before the 1990s. Today, it has become a commercial hub supporting almost a thousand wholesale shops. The Red Dragon market in Romania and the Greenwood International Trading Center in Moscow are also examples of such an approach to development.

The investors of the Chinese markets in Europe

16An unprecedented economic model in Europe, managed by immigrant entrepreneurs, the Chinese trading market is an economic pillar for European Chinese migrants, a platform of circulation of trading between China and Europe, and an infrastructure for the global trading network of made-in-China products. Investors in Chinese malls in Europe generally include five types of actors: non-Chinese entrepreneurs from the local society, Chinese migrant entrepreneurs living in Europe, entrepreneurs of other minorities in the local society, entrepreneurs from China, and Chinese state enterprises. There are various types of coalition between these investors: sometimes they work together, sometimes alone. Both conflict and collaboration occur. In the past two or three years, a new trend has emerged: some well-off Chinese entrepreneurs and enterprises have come to consider the real estate as a profitable item of investment, and are spending thusly. The most remarkable example is the Fashion center in Aubervilliers, an outskirt of northern Paris. During the 1970s Aubervilliers experienced a process of deindustrialization, as numerous enterprises left the city and invested in countries outside France. At this moment, a group of Jewish entrepreneurs saw a business opportunity: they purchased the abandoned factories, renovated the old warehouses into showrooms, and rented them to Jewish wholesalers. In the 1990s, some Chinese entrepreneurs were attracted by this pre-existing wholesale infrastructure and set up their own shops there. As the number of Chinese wholesalers increased, the Jewish entrepreneurs, principal landlords of the real estate, profited.

17The development of the Chinese wholesalers’ community in Aubervilliers continues to attract the attention of real estate promoters. In October 2006, French real estate companies invested tremendous capital to establish a “customized” wholesale center named “CIFA”. The first wave of the construction included 95 shops among 15,000 m², each between 110 and 400 m². The CIFA proposition occurred in the golden age of the Aubervilliers wholesale market: even before the center’s inauguration, its shops were already sold out. One year later, the company proposed CIFA’s second phase. In 2012, in the shadow of a global financial crisis, eight Chinese entrepreneurs collaborated in a new 1 billion euros construction project: the “Fashion Center”, also located in Aubervilliers. With a total surface area of around 5,500 m², the development will contain more than 300 wholesale shops and provide more than 2,800 jobs, with estimated financial flows up to 4.5 million euros.

18In Bucharest, from the “Europa center” to the Red Dragon Market, much of the real estate was owned by local Romanians. According to the local Chinese community leaders interviewed, the two Chinese markets were owned by Niro, a local company held by Romanian investors. In order to gain higher profit, the Niro company continually modified their rental strategy and even forced the Chinese wholesalers to rent new shops. Under such circumstances, the Chinese wholesalers in Romania organized the “Tangrenjie Realestate Group” (literally meaning “Chinatown”) and collaborated with a Turkey-based company that held land in Bucharest. They invested about 1 billion euros and constructed a 250,000 m² wholesale market, able to host more than 200 wholesale shops. Unfortunately, as the center was developed at the moment of the European debt crisis, the economic conditions were not beneficial for the Chinese enterprises. This structural situation was worsened by internal conflict between the Tangrenjie investors, and the final economic returns were not ideal.

The characteristics of Chinese mall economy in Europe

20Common characteristics of the Chinese migrant economy in Europe include small shops, extensive stocks, low barriers to entry, and large agglomeration economies. The malls’ spatial concentration of shops attracts a large number of customers, reinforcing their popularity and reputation. Moreover, the Chinese market also serves as a platform for the flow of information, which allows individual entrepreneurs to acquire knowledge efficiently. As a result, enterprises in the same sector can easily achieve consistency, thus enlarging the whole commercial sector.

21Most countries in Western Europe are welfare states with systems of high taxes. The market for local brands is already stable, and tend to lack products in the middle or lower end. The Chinese market is based mainly on low-end products imported from China. Its model of management is more or less characterized by informal practices: some retail shop owners maintain a relationship with wholesalers based on trust, taking products before payment; some wholesalers take orders from prominent local companies. Other practices situated in this “grey zone” include “grey declarations” (huise qinguan), overworking, etc. No matter their strategy, these practices generally create advantages over local entrepreneurs.

22Seen positively, the Chinese market is composed of low and middle-end products that complement the high-end products already existing in the local market. The wholesale sectors’ clients are mainly composed of other entrepreneurs who are also immigrants. In this sense, the local society’s lower and middle classes benefit directly from the wholesale business. On the other hand, it may be said that the Chinese market does not necessarily eclipse the model of the open-air market. Most shops are still based on the “family workshop” model that relies on family relationships and maximizes profits through informal channels.

23The informal economy takes advantage of the formal economy’s blind spots. Those “shortcuts” tend to allow the market to circumvent legal control. Legal inspection may not be considered a priority when the European economy is running well; however, in times of financial crisis, European governments tend to strengthen their control in order to increase revenue. After the financial crisis in 2008, the economy in Europe experienced a decline, and a heated debate arose in a context of economic disagreements and ethnic hostilities. As a result, the Chinese malls also became a target for critics and regulators.

The social and security problems faced by Chinese malls

24[We have decided not to translate this section because it is less pertinent to the concern of the special issue]

Perspectives of European wholesale markets

25In the near future, the migrant economic model in Europe may assume these three characteristics.

26First, income levels within overseas Chinese communities are becoming increasingly polarized. Amid Europe’s current economic decline, the Chinese mall economy also faces a need to restructure; indeed, in the coming three or four years, the European Chinese mall economy might generally weaken. According to our survey, some Chinese wholesalers are concerned that they may not be able to sell their stock in the coming five to six years. This holds especially true with respect to fast-fashion merchandise, such as clothes and bags. Smaller wholesalers will be forced to retreat from the industry. Even among the wholesalers whose business was relatively stable before 2008, many tended to over-expand and thus lose market share. At the same time, the disappearance of small shops leaves space for bigger enterprises. In Aubervilliers, for example, the Hengtong Group was established through the unification of eight entrepreneurs. Another response to the changing market has been the reinforcement of spatial agglomeration. For example, in Spain, small individual entrepreneurs have moved to bigger cities such as Madrid, Barcelona and Valencia in order to join larger markets and increase their enterprises’ popularity.

27Second, Chinese industry will seek Chinese government support and collaborate with Chinese enterprises in order to expand in Europe. China’s continuous growth since the 2008 economic crisis in Europe has attracted worldwide attention. Indeed, the Chinese migrant economy’s success is based on the international exportation of “made-in-China” products. As a result, the European markets’ decline has motivated some Chinese migrants there to turn to the Chinese domestic market, whereas others are trying to enlarge the European market by collaborating with Chinese enterprises.

28Third, the Chinese mall economy in Europe will become more active, and will provide enhanced opportunities for collaboration between migrant and local entrepreneurs. In Southeast Asia, the coalition between the Chinese and local governments is well-known. In my survey, I have noticed that Chinese entrepreneurs in Europe tend to follow similar paths as their fellows in Southeast Asia. In Europe, most countries are governed by a multi-party system. The different factions among the left and right tend to shift, and migration policies vary considerably. In light of the situation, some entrepreneurs have taken to invite local officials to visit China, and to meet with Chinese leaders. These measures not only improve the entrepreneurs’ symbolic resources, but also create close ties between Chinese leadership and European local officials. Other entrepreneurs have hired retired officials as consultants for their companies, or even named them “CEO”, so as to establish local social networks for their enterprises.

29In conclusion, a fair market share and coexistence with local society are necessary conditions for Chinese entrepreneurs in Europe to harmoniously fulfill development and integration plans. The European welfare system is based on high taxes; while Chinese entrepreneurs take advantage of local systems of social protection, they should also be conscious of their social responsibility to create wealth for local societies and populations. A minority group that positively creates employment opportunities and taxable income for its host society can necessarily win the respect and recognition of local governments and citizens, creating solidarity between their host society and their home country. It is necessary for Chinese wholesalers to normalize their business practices with respect to the mainstream law, thus improving their image in the process.