Digital-Physical Coupling in Global Trade: Threshold Effects and Cost Restructuring in Yiwu’s Cross-Border E-Commerce Model

DOI

10.2991/978-2-38476-507-2_13How to use a DOI?

Keywords

Cross-border e-commerce; Yiwu model; Trade cost restructuring; Digital-physical coupling Market procurement trade

Abstract

This study investigates the restructuring of global value chains (GVCs) through the lens of Yiwu, China—a pivotal hub for small commodity trade handling over 100,000 non-standardized SKUs. Analyzing pandemic-induced disruptions and institutional innovations, we reveal how digital efficiency gains collide with persistent physical constraints. Empirical data from 368 stratified merchants shows accelerated order fragmentation (average value down 37.8% to $3,870) and bifurcated digital adoption tied to a Digital-Physical Coupling (DPC) index. Key findings include: (1) A DPC threshold of 0.63 (1 = full substitution) optimizes hybrid operations, with high-DPC sectors (daily goods, DPC = 0.82) gaining 34% inventory efficiency, while low-DPC sectors (e.g., jewelry, DPC = 0.39) suffer 27% higher disputes; (2) Emergence of dual-track cost dissipation: physical logistics costs decline historically (-3.2% p.a.), while institutional costs (platform fees, certifications) surge 27.3% p.a., consuming 70.8% of cost structures; (3) Yiwu’s Market Procurement Trade (MPT, Code 1039)—covering 76.3% of exports—buffered institutional shocks, granting users 2.3-ppt higher margins and 43% lower compliance costs through VAT exemptions and streamlined clearance. Theoretical contributions include: (a) Calibration of elasticity coefficients (β = 1.37 for standards complexity; γ = 0.82 for SKU diversity) exposing scale diseconomies in non-standard trade; (b) Micro-foundations for county-level GVC embeddedness, where Yiwu’s 1,732 export-focused SMEs leverage network redundancy (11 transport routes) and physical-digital synergy (75,000 stalls feeding 87% warehouse signals); (c) A resilience model where strategic coexistence of digital tools and physical infrastructure (e.g., “four-warehouse integration” cutting turnover to 18 days) outperforms full digitization. The Yiwu “ant army” strategy demonstrates replicability for emerging economies, contingent on local DPC calibration (e.g., Bangladesh garments at DPC = 0.58), and necessitates institutional innovation as a core production factor in trade theory.

Copyright

© 2025 The Author(s)

Open Access

Open Access This chapter is licensed under the terms of the Creative Commons Attribution-NonCommercial 4.0 International License (http://creativecommons.org/licenses/by-nc/4.0/), which permits any noncommercial use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license and indicate if changes were made.

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TY  - CONF
AU  - Yicheng Yao
PY  - 2025
DA  - 2025/12/15
TI  - Digital-Physical Coupling in Global Trade: Threshold Effects and Cost Restructuring in Yiwu’s Cross-Border E-Commerce Model
BT  - Proceedings of the 2025 4th International Conference on Public Management, Digital Economy and Internet Technology (ICPDI 2025)
PB  - Atlantis Press
SP  - 138
EP  - 148
SN  - 2352-5398
UR  - https://doi.org/10.2991/978-2-38476-507-2_13
DO  - 10.2991/978-2-38476-507-2_13
ID  - Yao2025
ER  -