THE world’s largest factory has a problem.
As the Iran war drags on, prompting worries of a global recession and the destruction of consumer demand, China may struggle to sell its many goods abroad.
It’s prompting investors to discuss where to find the most resilient segments of the market and hunt for the next big opportunity.
Several candidates have been floated. Consumers will want to buy more electric vehicles (EVs) if petrol prices stay elevated.
Overseas shipments at national champion BYD Co might rise another 50% this year after doubling in 2025, according to Bloomberg Intelligence.
Another possibility is leveraging China’s massive reserves of cheap electricity to process tokens – a unit of artificial intelligence data – as Americans crave more.
Token exports can result in as much as a 22-fold increase in value-add for the power-generation industry, according to state media.
These are certainly lofty, high-tech areas that the government is keen to foster, but their success is by no means guaranteed.
The European Union is wary of Chinese car imports destroying its local industrial base, while the prospect of Americans sending billions of queries to data centres thousands of miles away in western China can quickly result in congressional investigations and usage bans.
Plus, EVs are big-ticket items that verge on investment goods. Households wary of job cuts may not take the plunge.
Rather, when the global economy slows, China’s core competency lies in manufacturing small commodities from earrings to incense burners. Sometimes, to win big, you have to think small.
The concept of treat culture – the habit of indulging in small luxuries in rough times – has been around for decades.
It’s well-known that women turn to lipstick, for example, when times are tough.
Shades that brighten skin tones are not only substitutes for high-priced luxury items, but can boost morale as well.
Cravings for these “little treats” are even more pronounced among Gen Z-ers.
Many do not feel financially secure but nonetheless want to reward themselves once in a while. Some are going beyond their budgets to do so.
To get a sense of the grip China has over small pick-me-ups, it’s worth looking at Yiwu, a global wholesale trading hub in the eastern Zhejiang province that’s about 1.5 hours by high-speed train from Shanghai.
The city has six sprawling districts, hosting tens of thousands of vendors, each dedicated to products as specialised as pens and kettles.
Wholesalers make every possible permutation of whatever concept they’ve created, hoping that one will stick.
One store, called “Soft Fufu,” only sells highly realistic plastic baked goods that actually smell like the food.
Another offers fashion dolls in dresses that resemble Chanel’s ready-to-wear collections, and has made dozens of variations for customers to choose from.
Given the vast scale, it’s no surprise that the sad toy horse that went viral this year came out of Yiwu.
The city is called the world’s small-commodities capital for a reason – the startup costs for a foreign small-business owner selling lifestyle products is not high.
Making one wholesale order of, say, a fashion hair clip or a keychain toy, costs only about US$300.
Further, the Chinese government’s trade policies have allowed Yiwu to flourish.
Under the so-called customs code 1039, buyers can ship large varieties of items, each in small quantities, hassle-free and tax-free, as long as their total value is capped at US$150,000. This is why US President Donald Trump’s trade tariffs hardly put a dent in Yiwu’s economy.
Customers from the Global South have overtaken the United States as the city’s biggest clients.
In the first two months of this year, exports from Yiwu jumped 53%, following a 24% increase in 2025.
Calls to vendors in the city indicate that Spanish translators are more sought after than English-speaking ones.
The math works for everyone along the supply chain.
Suggested retail prices are often 40% higher than wholesale, leaving plenty of room for foreign resellers to make a profit, according to calls to vendors.
Meanwhile, items such as toys can be highly lucrative – Pop Mart International Group, the maker of the popular Labubu, earned 72% gross margin last year.
China’s grip over small commodities reminds me of its control over rare earths, whose market size was only an estimated US$4.1bil in 2025.
It was so small that other economic superpowers didn’t bother to develop the commodities domestically.
But these boutique corners of the supply chain can be profitable and influential.
Unlike EVs and artificial intelligence tokens, no politician will stop young voters from wanting some delightful little treats when they are feeling bad. — Bloomberg
Shuli Ren is a Bloomberg Opinion columnist covering Asian markets. The views expressed here are the writer’s own.
