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The ghosts of retail

China is seen as a trade giant all over the world. However, in Hungary, hawkers of cheap “Made in China” goods are losing ground in the crisis.

At 9:30 on a Wednesday morning at the Four Tigers market in Budapest’s Józsefváros the stalls are already open, despite the fact that there are few shoppers. There is usually little activity at this hour, but shops open early to serve bulk buyers who take T-shirts, purses, shoes and clothing accessories and sell them downtown. It looks like business as usual, but people’s expressions are sour and there is a lot of sighing when the BBJ asks them questions.

Business is bad. Retailers in Hungary are suffering in general, and so-called Far Eastern markets seem to be hurting even more than the others. According to a recent study by GfK Hungária, a Hungarian market research firm, people interested in buying clothes are increasingly favoring hypermarkets and discount stores over Far Eastern markets. Interestingly, instead of going for the cheapest goods – which we would expect in such an uncertain recovery – they are even willing to pay more, as long as it is better quality. Meanwhile, the least well-off consumer segments have probably stopped shopping for non-essentials altogether.

This leaves Far Eastern merchants in dire straits. “If I lower my prices any more, I will end up paying the difference from my own pocket,” a fortyish Vietnamese man selling sandals, sneakers and flip-flops at Four Tigers complained. Still, people expect lower and lower prices, he adds.

Falling sales usually also mean lower wages for most workers in the market, as these are calculated based on turnover. “I can no longer tell whether I will be earning HUF 60,000 or a HUF 100,000,” a Romanian woman selling summer dresses told the BBJ. She has been working there since 1996, when the market was at its peak. There was such a high demand for stalls that they had to take over the factory buildings across the street, too. But those days seem gone forever. “For the last five years, each year has become worse than the last,” she added.

The silence of the tigers

Far Eastern markets, such as Four Tigers, present an important and, by now inseparable part of the city’s landscape. With millions or, perhaps, even billions of goods that originate at such markets circulating within and outside of Hungary, they act as separate micro economies with strong transnational links. Yet, they are sensitive to international and domestic fluctuations as their existence is shaped by the same rules of supply and demand. This is why the financial crisis and Hungary’s slow recovery have had a significant negative effect on the Far Eastern retail industry.

Exactly how bad they are doing is difficult to gauge. First of all, some of the activity in the market is probably illegal, and does not even appear in tax statistics, Gergely Salát, assistant professor at the department of Chinese Studies at ELTE University, explained to the Budapest Business Journal. Also, neither the management of the market nor the traders share information on market turnover, volume or individual income.

The Hong Kong of Europe

A wave of Chinese immigrants to Hungary started in 1989, when it became the first European country to abolish visa requirements for Chinese citizens. Hungarian businesses quickly grasped the potential profits these traders could generate. In 1994, an investor leased 3.5 hectares of land next to Józsefváros railway station, where the market, named ‘Four Tigers,’ was built.  The market quickly assumed a central position in Eastern Europe’s Chinese economy.  In the mid-1990s, due to the overwhelming demand for stands at the market, former factory buildings across the road were adapted to accommodate additional hundreds of stalls. Although commonly referred to as the ‘Chinese Market’, Four Tigers attracts Mongolians, Vietnamese, Armenians, Ukrainians, Romanians, Egyptians and retailers of other ethnicities in addition to Chinese migrants.

Little(r) China

One thing is sure: it is not just the crisis that is working against Far Eastern shops in Hungary, but more long-term trends, too. “Hungary has been losing its position as a hub for Chinese economy in the CEE region ever since the neighboring countries opened up,” Éva Nagymáté, president of the Edictum Foundation for integration of foreigners pointed out. Countries like Poland, Romania and the Ukraine now have their own Chinese suppliers, thus there is no need for entrepreneurs to come to Hungary to buy in bulk (and then sell at home for double the purchase price.) This has hurt Far Eastern sellers in Hungary, as they make the most profit in wholesale.

With economic difficulties piling up, retailers at the Chinese markets find themselves pessimistic about future prospects.