Wenzhou -- Flagship of Private Business

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 ◆ Wenzhou -- Flagship of Private Business

We now invite you to travel eastward to Wenzhou in Zhejiang Province, to see how the birthplace of China's individually-run enterprises is keeping its leading position as its economic structure first took shape 20 years ago. This flagship of private business has been involved in censure, disputes, commendation, and challenges at various stages. Biz-China had an exclusive interview with its city official, who has witnessed the ups and downs of private businesses in the City over the past two decades. Here is Zhong Qiu with the special report. "Want to get an idea of how China's private sector is doing? Then look at Wenzhou." Wenzhou is probably the first word that comes to mind when talking about China's private businesses. It would be no exaggeration to say that the city is regarded as the symbol of the private business mindset in the country. Over the past two decades, Wenzhou has turned from a backwater city to a vanguard of the private economy. Over 20 years ago, Wenzhou suffered from a poor transportation system. There were not even adequate roads or railways, let alone an airport. Only a waterway connected the city to the outside world, so local people nicknamed it "dead lane." With the country's campaign of reform and opening up to the outside world, local people started to promote small commodities such as shoes and plastic cups, despite the city's poor infrastructure. City official Bao Zhedong recalls the scene. "In the 1980s, people were allowed to open family businesses. That led to a trend in Wenzhou. Many families had small factories of their own, and at the same time, ran shops to sell their own products." But healthy returns were not enough to support private enterprise, which at that time was still a new concept. People across the country began to question the virtues of private ownership. Was it the running dog of capitalism, or actually a good way to improve the local economy? Among the many differing opinions, the local government was determined to take the following stand. "We believed that as long as it was helpful in improving people's living standards and the local economy, we had to give it firm support." Bao Zhedong says the local government issued a series of regulations to create a better business environment for private enterprises. Local businessmen, who had previously been farmers, in addition to undergoing a change in mentality, also felt the support given by the local government. However, the pursuit of huge profits caused some entrepreneurs to lose their wits. Fake products flooded the market, which resulted in Wenzhou products being condemned nationwide. In 1987, consumers in a nearby city burned over 5,000 pairs of shoes made in Wenzhou to highlight the bad quality coming from Wenzhou enterprises. After that event, entrepreneurs in Wenzhou regretted selling their reputation for profit. The city pledged to build up a "credit city", as Bao Zhedong explains. "There are three factors in a credit system. One is to regulate the government. The government, first of all, must keep its promises. Second, all businesses are required to be honest. And of course, all the individuals in the city must also have a good credit record." Along with the city's efforts to build up a credit system, the central government's support for private businesses was a source of comfort for local officials and businessmen. "With business information from all over the country, and the capital accumulated during years of hard work, family businesses have been restructured into stock-holding companies. With that, businesses worked more efficiently." Bao Zhedong says the gross domestic product in the city grew almost 70 fold over the past two decades. Now its exports account for a seventh of the province's total export volume. And even more astonishingly, the cigarette lighters made in the city make up four fifths of the global market. But Bao Zhedong says this is not the end. Low manufacturing costs will no longer be one of Wenzhou's competitive advantages, as their competitors in the western regions are quickly catching up. Moreover, China's entry into the World Trade Organization has brought about fiercer competition from foreign companies. So what are the people of Wenzhou doing about this? "Our focus is on how to guide our businesses to become bigger and stronger on the same level of big international players, even though this will take time." So far, Wenzhou has established 11 national manufacturing bases, each with research and development centers, training institutions, and quality control organizations attached. "We're no longer satisfied with the current situation. Low manufacturing costs are gradually losing their ability to make us competitive. Instead, the key now is to have your own brand." ?¨º?¡ìCRI January 10, 2003?¨º?