Huaqiangbei trades computer chips for lipsticks

"China's Silicon Valley" is getting a makeover as retailers ditch digital deals and opt for beauty products. 

In recent years, Huaqiangbei, a sprawling electronics hub and symbol of Shenzhen, Guangdong province, that was once dubbed "China's Silicon Valley", has become the nation's biggest wholesale high-end cosmetics market.

Covering several blocks in Futian district, Huaqiangbei is home to dozens of markets packed with stalls that once sold cellphones and electronic components in bulk. The area also acted as a matchmaker for businesses and suppliers across Guangdong, China and even Asia.

By the end of last year, nearly 20 percent of the stalls that once sold phones, computers and electronic components were packed with Lancome lotions, La Mer creams and MAC lipsticks.

The daily sales value of cosmetics can reach 4 billion yuan ($619 million), according to Huaqiangbei merchant Huang Saibao.

Crackdown

However, early last month, the area's vendors were hit by a market rectification campaign launched by the local customs and police, which forced the temporary closure of most of the cosmetics stalls.

On Jan 5, local customs started an inspection of the cosmetics malls following a General Administration of Customs' crackdown on gangs linked to cross-border e-commerce platforms, which smuggle goods into the Chinese mainland to avoid import taxes.

Large amounts of goods suspected of being imported illegally-including beauty products-were seized, while 36 suspects were arrested, according to China Central Television.

The total value of the goods exceeded 600 million yuan.

A public relations official at one of the malls told online financial news platform 21jingji that stallholders had been ordered to fill in accounts books and provide purchasing records as required by the government.

Veteran stallholder Huang was unaffected. "My goods are imported through legal channels, but my trade with stallholders in the cosmetics malls has been suspended recently," he said, adding that he had no idea when things would return to normal.

Located on a crossroads in Huaqiangbei Commercial Street, Huang's stall is highly visible to passers-by and retailers visiting the area to replenish their stock.

"After several thousand orders were placed at one time, last year's sales volume reminded me of the glory days," the 42-year-old said.

His customers include retailers from the nearby Mingtong Mall, which was the main target of the rectification campaign, along with cosmetics' livestreamers and vendors from Alibaba's Taobao stores.

The COVID-19 epidemic has hampered many independent buyers who used to travel overseas to purchase cosmetics at duty-free shops, while the emergence of livestreamed e-commerce has catalyzed the booming market in Huaqiangbei, according to Huang.

He opened his stall, which has a "golden position" at the corner, in September, paying 850,000 yuan to book the pitch plus monthly rent of 100,000 yuan.

It wasn't Huang's debut in the cosmetics business, though. Before moving to the crossroads, he sold beauty products in Mingtong Mall, which is still officially called Mingtong Digital City Market even though almost all the merchants have transferred from electronics to cosmetics since 2017.