Investors from the east coast city of Wenzhou, which has a reputation as the home of China’s savviest businessmen, have seen their investments in Dubai backfire following Dubai World’s announcement last week that it would seek a six-month extension on debt repayments.
Zhou Dewen, the head of the Wenzhou Small and Medium Enterprise Business Development and Promotion Association said he estimates the combined losses of Dubai’s 20,000 Wenzhou entrepreneurs at more than $146.5 million.
Over the last decade, Wenzhou merchants have followed an aggressive “going-out” strategy, seeking out business opportunities around the world, from traditional import and export businesses to organizing overseas real-estate “shopping trips.” Dubai soon became one of the favorite destinations for Wenzhou businesses, thanks to its open market, a huge demand for imported products and duty-free tax policies.
The Wall Street Journal said though actual losses are difficult to measure, Zhou Dewen warns that the impact may extend to other sectors. “We can tell that the confidence among Wenzhou merchants to invest in Dubai is declining, as the suspended projects in Dubai could also lead to sluggish demand for building materials, hardware fittings and even consumer products.”