The city of Wenzhou in eastern China, an export-oriented manufacturing mecca, is seeing an economic recovery thanks to Beijing’s stimulus measures and the capacity of privately owned local firms to address challenges.
Renowned for its free-wheeling entrepreneurs, Wenzhou is a barometer of China’s industrial economy. Businessmen from the city, in Zhejiang province south of Shanghai, have invested in property across China and set up shop around the world.
Shao Zhanwei, the city’s Communist Party secretary, said Wenzhou was targeting 9% growth this year, up from 8.5% in 2008. That was below the national rate of 9.0%.
‘I’m sure that things will turn better in March as compared with the first two months, and in the second quarter as compared with the first quarter,’ Shao told Reuters in an interview. ‘The economy will keep accelerating quarter by quarter.’
A recent survey of 7,300 big local firms showed that about 74% had been running at full capacity since the Lunar New Year holidays ended a month ago, while electricity consumption had gradually picked and was almost back to pre-slowdown levels by the end of February, Shao said.
‘On the one hand, the global financial crisis has yet to bottom out,’ Shao said. ‘On the other hand, companies are better able to expand into new markets and look for alternative ways to address the crisis.’
Shao said Beijing’s RMB4 trillion stimulus package and accompanying measures to boost its 10 key industries would benefit local firms such as CHINT Group.
Nan Cunhui, chairman of CHINT, which makes power-distribution and communications equipment, said orders in February were up by two-thirds from a year earlier and by 92% from January.
The timing of the Lunar New Year holiday, which fell in February in 2009 and January in 2008, is a recipe for volatility in orders and output early in the year.
But Nan said of the jump in new business: ‘This shows we are feeling the impact of the country’s infrastructure investment.’
CHINT plans to invest 2 billion yuan this year to upgrade its factories producing high- and low-voltage electrical gear. It will also plough 5 billion yuan into a solar energy project launched in 2008 in Hangzhou, the provincial capital, he said.
Shao said the main concern of Wenzhou as a whole right now was the outlook for exports; shipments of leather shoes to Russia were falling and barriers were going up overseas against Chinese-made goods, he said.
Net exports account for almost 40% of Wenzhou’s economic growth.
Forbes reported that another recent survey, this time of 873 local firms, showed almost one-third was experiencing falling orders, particularly from overseas; another 9.3% of respondents said they were getting next to no new business at all.
But compared with other parts of China, Shao said companies in Wenzhou would be the first to emerge from the global crisis.
The city’s exports fell 1.4% in January from a year earlier, compared with a nationwide drop of 17.5%, and shipments to the United States and Europe actually rose due to their low prices, Shao said.
Wenzhou’s private businesses typically fund themselves through informal financing channels, not through bank loans.
Shao said a vast private funding pool in Wenzhou of about RMB60 billion as well as local people’s extensive business connections at home and abroad would help them expand markets and work their way out of the crisis.