News

Wenzhou's workshops crafted economic legend

By Han Tianyang (China Daily)
Updated: 2010-06-19 07:18

Small commodities meant big profits during heady days of economic reform

After they began making small commodities like lighters, spectacles, shoes and buttons at the onset of China's reforms three decades ago, workshop manufacturers in the coastal city of Wenzhou in Zhejiang province became known as pacesetters for private enterprise in the nation.

To the surprise of many, such unremarkable products created a huge market and brought wealth to the city and its people.

Last year, Wenzhou's GDP reached 253 billion yuan, almost 200 times its GDP in 1978.

The average disposable income of urban residents has increased to 28,000 yuan from 477 yuan in 1981. The net income of rural residents grew to 10,100 from 113.5 yuan 30 years ago.

The engine driving the miracle in Wenzhou, now one of the wealthiest and most prosperous cities in China, is the private economy, unlike many other regions whose livelihood is dominated by State-owned companies.

Wenzhou's vigorous private sector has now attracted copycats trying to learn from its success - the so-called "Wenzhou model".

Yet some say that the "Wenzhou model" actually means no model, since Wenzhou locals don't rely on any type of blueprint. The city's businessmen are known as open-minded, flexible and eager to embrace new ideas.

Ahead of most other regions in the country, Wenzhou's individual businesses and family workshops mushroomed in the 1980s as China took its first steps toward reform and opening up.

By acting early, Wenzhou's private economy grew enormously. The segment now accounts for 80 percent of Wenzhou's total GDP, the highest ratio in the nation's average.

Wenzhou's greatest success has come in overseas markets.

In the first four months of this year, the city's foreign trade totaled 3.7 billion dollars, with shoe exports - the biggest item - valued $927 million, followed by clothes, electrical apparatus, synthetic leather and spectacles.

In eastern European countries, shoes made in Wenzhou virtually dominate the market.

Lessons learned

Yet behind those achievements have been setbacks and frustration.

In the late 1980s, just as the shoe market burgeoned, some manufacturers in Wenzhou eager for quick profit and used fake leather and even paperboard, badly damaging the reputation of Wenzhou shoes and causing in a nationwide boycott of their products.

Wenzhou businessmen learned an important lesson - sustainable profits only come from quality products and credible brands - and gradually got back on their feet.

In 2004, Wenzhou was named a National Brand Economy City. By 2007, it had 38 Chinese Famous Brand products, 80 China Well-Known Trademarks, 157 National Inspection-Free products and 210 Zhejiang Provincial Famous products.

Government support has also played an important role in the development of the private economy in Wenzhou.

As the sector began to rise in the 1980s, the local government saw the advantages of the private economy and moved help small companies.

When businesspeople encountered the crisis in trust caused by fake goods, the government called for local companies to build prestigious brands to improve the image of Wenzhou enterprises and the city.

During the global economic downturn, local authorities put in great effort to promote modernization and restructuring to build long-term competitive strength in the private sector.

Shao Zhanwei, secretary of the Wenzhou Party committee, said he firmly believed local enterprises would lead the recovery - comparing private companies to wild grass that might wither in winter but will sprout again in spring.

(China Daily 06/19/2010 page12)