Three Chinese traders stormed into Sutan’s office in the eastern city of Yiwu looking for answers. They were owed money, and after a year and a half of not being paid, they were tired of waiting.

But there was a problem: Sutan wasn’t the person who had taken out the loan from them. The culprit was another Egyptian businessman, one Sutan had never even met. The suppliers merely knew that Sutan was the former head of the Egyptian chamber of commerce in the city, and well-connected with Yiwu’s Egyptian merchants. As such, they thought he could help them track down their deadbeat debtor, and at one point even offered to pay him for his services.

In the end, Sutan turned down their request. Later, he told me that this was an all-too-common occurrence: Practically every local business owner in Yiwu was owed money by merchants, many of them foreign. It would be impossible for him to help every single person who came knocking.

Yiwu is a classic example of what scholars term “low-end globalization.” Nicknamed “the world’s supermarket” for its ubiquitous — and cheap — wholesale markets, the city has long been popular among foreign merchants looking for inexpensive imitation-brand goods that can be sold for a profit in their home countries. In 2019 alone, Yiwu’s total export volume reached 286.8 billion yuan ($42 billion), spread across more than 210 different countries and regions.

Prior to the mid-2000s, most deals in Yiwu were made in cash. In recent years, however, more and more merchants have allowed customers to purchase on credit. Not only has this freed buyers from artificial limits like how much cash they can raise and get across the border, but it has also proved to be a boon to local sellers by increasing the volume of goods they can move in a given transaction. Yet for smaller merchants left more exposed to the risks of a bad bet, the consequences of a default can be devastating.

Sutan first got involved in the import-export trade in the late 1990s. Born in the Egyptian port city of Alexandria, he did a stint in the military before joining an oil company, where he was responsible for procuring drilling equipment. In 1996, on a trip to the southern Chinese city of Guangzhou to attend the Canton Fair, he was bowled over by the sheer range of products on offer, as well as their low prices.

Over the next two years, the idea of buying goods in China and shipping them back home to sell continued to nag at him. Finally, in 1998, he quit his job, cobbled together $20,000, and bought an international plane ticket. At first, his deals were all in cash. He would fill his hotel room with goods, then once he had enough to fill several large suitcases, he would fly home and sell them. It was a profitable business: Sutan could net almost as much in a single trip as he did in half a year at the oil company.

However, as an individual foreign trader, there were limits on the amount of cash Sutan could carry with him on each trip, which in turn restricted the amount of goods he could purchase. His regular Chinese suppliers eventually started proposing he buy on credit, paying for the goods only once he had sold them and returned to China for another shipment. Suddenly, he had access to $100,000, $200,000, or even $300,000 at a time.

Many Arab businessmen tell similar stories. As Sutan remembers, selling on credit became particularly widespread around 2008. At first, the credit trade was limited to stable partners who knew and trusted one another. But competition and a desire for higher profits led Chinese suppliers to embrace credit, even when dealing with unfamiliar partners. Businesses that didn’t allow buyers to purchase on credit quickly lost customers and were swallowed up by the market. Only a few sellers, dealing in scarce or hard-to-find goods, are still able to insist on cash.

This shift has increased many merchants’ risk of exposure. Cross-border trade is frequently subject to uncontrollable natural and human factors, and a single problem in any link of the chain has the potential to disrupt the entire process. Sutan once had a shipment of underwear worth around $300,000 catch fire en route to Egypt. On other occasions, his goods arrived but couldn’t be sold because of delays either in shipping or clearing customs. Items originally ordered in the run-up to the Islamic holiday Eid al-Fitr become worthless if they fail to arrive on time, for example. In such cases, Sutan was on the hook for significant losses, though he would typically try to negotiate a discount with his suppliers.

And then there’s issues like vanishing customers, deliberate defaults, and the misappropriation of funds by middlemen. Some buyers familiar with the credit model in Yiwu start out dealing in cash, switch to credit after gaining the trust of their suppliers, then abscond once they have their goods. Buyers and sellers alike often refer to credit as a “cancer” because of how it tends to metastasize across the supply chain.

Yiwu’s merchants have developed strategies and networks to insulate themselves from some of these risks. When working with a prospective new client, the city’s businessmen often utilize the private networks of other sellers — mostly on social networking platforms like WeChat or QQ — to inquire about their background. Some Chinese sellers will even travel to their potential business partner’s home country to find out more about their financial situation.

The ongoing COVID-19 pandemic has further destabilized an already-shaky market. Some of the local businessmen jokingly say they’ve played the “whole game”: In the first half — roughly January through March — the outbreak in China meant sellers couldn’t get their goods out of the country; in the second half, China recovered just as other countries plunged into their own crises, further disrupting shipments. Business still hasn’t returned to normal, both because most buyers remain unable travel to China, and because sellers worry the post-pandemic economic slowdown could have a lasting impact on sales.

Yet not all credit transactions have halted. Many sellers have developed long-term or even personal relationships with their buyers, and they feel comfortable in their partners’ capacity to pay. For them, as long as the goods are moving, there’s still cause for hope.

The informal economy and the practices of low-end globalization generally aren’t protected by law or formal trade practices. This has a way of rendering them fragile, but also flexible. Because they operate outside of official rules and regulations, buyers and sellers must be able to constantly readjust to changing circumstances, whether individual, political, or environmental.

“The business world is like a casino,” one local seller told me. “Everyone in Yiwu is operating on credit, and we haven’t all gone bankrupt yet. Business will roll on.”

Translator: David Ball; editors: Cai Yiwen and Kilian O’Donnell; portrait artist: Zhang Zeqin.

(Header image: Buyers inspect items at a store in the Yiwu International Trade Market in Jinhua, Zhejiang province, March 30, 2015. Lü Bin/People Visual)