Wenzhou, a small city located in the southeast corner of China, is one of the most developed regions in terms of privatized economy in the country. The “Wenzhou Model” of economic development and modernization has been well known both in China and abroad.
Since the economic reform over 30 years ago, the rapid development of private enterprises in Wenzhou, accounting for more than 95% of the GDP at one point, has become the most well-known trademark of the city and serves as the backbone of economic development in the city. With the continuous advancement of economic globalization, private enterprises in Wenzhou quickly took up the opportunity to manufacture and export a large number of low-cost industrial products to the rest of the world.
Unfortunately, as the western economy collapsed during the 2008 US subprime mortgage crisis followed by financial turmoil sweeping around the world, Wenzhou could not be spared as it felt the strong effect of the aftermath. Foreign trade orders plummeted with default increasing significantly as hundreds of millions of dollars of overdue payments were substantially delayed, which dealt a heavy blow to the small and medium size enterprises in Wenzhou that were highly dependent on foreign trade.
As the world economy continued to slump, new political movements of trade protectionism began to intensify and added another huge impact on private enterprises in Wenzhou who were already struggling at the time. On the other hand, as most od the city’s private enterprises were producers of low to medium cost products, the primary trading edge of private enterprises in Wenzhou was gradually disappearing with profit margins quickly shrinking. Driven by the interests of short-term speculation, industrial capital outflows had grown exponentially to speculation on everything from real estate and commodity prices to junk bonds. This financial frenzy eventually came to an end as a private corporate loan crisis broke out in the second half of 2011. The entire credit system crashed as numerous factories closed doors with their owners nowhere to be found, and many other enterprises simply hanging on by a thread.
Since the beginning of 2008, Wenzhou has been ranking at the bottom on the main economic indicators among all major cities in the province of Zhejiang. Despite official news from May 2016 showing that the financial turmoil in Wenzhou has now subsided, and the city’s economy in 2015 showing a steady recovery in good momentum with 14 economic indicators among the top three in the province of Zhejiang, the memories of bankruptcy still linger over the city and the economic vitality and prosperity that once was commonly seen seems to have been replaced by sadness over the burden of debt on the faces of local entrepreneurs. Whether this difficult moment is permanent or temporary remains to be seen, as private enterprises in Wenzhou continue to struggle amid difficult challenges.
Lianzhou Foto 2016
November 19 to December 9 2016
Lianzhou, Guangdong
China
