Summary of Key Points
Yiwu Small Commodities City (a listed company on the A-share market) plans to list in Hong Kong with the goal of transitioning from a traditional "rental operator" that makes money by leasing out shops to a comprehensive international trade service provider. The company's current main revenues come from the rental business, which has high margins but is showing signs of growth stagnation, and the commodity sales business, which has low margins. The new businesses (digital trading platform and cross-border payment services) are growing rapidly but are still small in scale. The funds raised through the Hong Kong listing will be used to upgrade the digital platform, establish overseas warehouses, and accelerate the company's globalization efforts. However, the company faces challenges such as a bottleneck in rental income growth and frequent changes in management.
I. Traditional Business Models: Stable Rental Income but Limited Growth Potential; High Volume Sales with Low Profitability
Yiwu Small Commodities City's original core businesses were two main areas:
- Rental Income: The company leases out shops in the market to merchants, generating high profits—with a gross margin of 82.9% in 2025 (out of every 100 yuan in rental income, 83 yuan is pure profit). However, the rental rate is nearly saturated, and any further increase in rents would put pressure on merchants due to the overall economic environment, limiting growth potential.
- Commodity Sales: Although this business accounts for the largest proportion of revenue (50.7% in 2025), the gross margin is very low, barely covering costs—only 0.7% (meaning only 70 cents are made from every 100 yuan in sales). This model results in a single-source of profit and weak sustainability.
II. New Transformation Directions: Leveraging Digital Platforms and Cross-Border Payments to Become a Comprehensive Trade Service Provider
To move away from its traditional role as a rental operator, the company aims to transform into a comprehensive international trade service provider, relying on two key tools:
1. Chinagoods Digital Trading Platform: Launched in 2020, this platform helps merchants find customers, manage logistics, and provides financial services (such as loans). Revenue from this business increased by 138% year-on-year in 2025, making it the fastest-growing segment, but it still only accounts for 6.6% of total revenue.
2. Cross-Border Payment Service "Yizhifu": This service addresses merchants' needs for cross-border payments, handling 43.7 billion yuan in transactions and serving 25,000 customers across more than 170 countries. It is also the only platform in China designated as a pilot for market procurement trade settlement, giving the company a competitive advantage in cross-border payment services.
These two businesses represent the company's "second growth curve," but they have not yet become significant enough to significantly change the revenue structure.
III. Listing in Hong Kong: Not Just for Financing, but to Accelerate Globalization
The main purpose of listing in Hong Kong is to raise funds for transformation initiatives, with the funds specifically allocated to the following areas:
- Upgrading the Chinagoods platform to make it more efficient and capable of serving a global customer base.
- Establishing overseas warehouses to store goods in advance, enabling faster delivery after customer orders.
- Improving cross-border trade services (such as customs clearance and logistics).
- Obtaining a cross-border payment license to legally collect payments abroad without relying on third parties.
Why Hong Kong? The Hong Kong stock market is more international, attracting global investors and facilitating the company's expansion into overseas markets. As a comprehensive international trade service provider, it is essential for the company to gain recognition worldwide.
IV. Challenges on the Transformation Path
Despite the right direction, the company faces several difficulties:
- Rental Income Growth Stagnation: With saturated shops, increasing rents could drive merchants away, while not raising them would hinder growth.
- Frequent Management Changes: The transformation was initiated by Zhao Wenge in 2018; he resigned in 2024, and Wang Dong took over for 11 months before leaving. The frequent changes in management raise concerns about the stability of the transformation strategy.
- Small Scale of New Businesses: Although these new businesses are growing rapidly, they still account for only a small portion of total revenue and will take several years to become a major source of profit.
Additionally, as a state-owned enterprise under Yiwu City's jurisdiction, balancing state asset management with market-oriented transformation is another challenge that the company must address after listing.
Conclusion
Yiwu Small Commodities City has evolved from a small-scale business to a potential global player. Listing in Hong Kong is a crucial step towards its transformation. However, success will depend on the growth of its new businesses and the ability of the management to maintain a consistent direction. Transformation is never an easy process.