Shoe Capital Wenzhou Credit Funds Deadlock

A heavy rain continued for several days in a row. Wenzhou relieved the accumulation of high temperature in one day, but the heat did not go away.

Wenzhou is a typical sample of China's private economy, where more than 30 million small and medium-sized enterprises have been accumulated. In the past, it has created a world-wide "Wenzhou economy" mode.

However, under the pressure of tight credit and tight external demand, we are facing unprecedented difficulties.

On the one hand, there is a surge in bank deposits. On the other hand, private financial institutions are lending heavily and usury is rampant.

There is plenty of money in the region, but it is difficult for enterprises to raise funds. It is a contradiction. Some small and medium-sized enterprises are in confusion: can they survive?

Blood loss from Hua Shan

At noon on July 8th, the scorching sun roasted the Wenzhou economic and Technological Development Zone.

After passing through Wenzhou Avenue, Pan Haijing pointed to the factory building along the road and said, "look at this row. It's all empty."

Pan Haijing, who runs nearby Internet cafes, said that due to the closure of some businesses or the production of Internet cafes, the number of Internet cafes was significantly reduced, and the outlets also contracted.

At the junction of Wenzhou Avenue and Xin'An River Road, the "Hua Yi dress" stands tall with several tall words.

Two stone lions on the main entrance of the workshop reveal the glory of the day, while the seals of the court in Longwan District of Wenzhou remind them that the buildings are deserted.

Along the Qianjiang Road, less than ten meters away, the dragon clothing also follows.

A court official in Wenzhou said that the two brothers were actually brothers, and another family enterprise in Panshi Town, Yueqing, was named Ning Nu dress Co., Ltd. the two brothers were Wu Liwu and Wu Liyong.

At present, Wu's family has disappeared.

In 1996, Wu brothers set up Ning Nu Fashion Co., Ltd. of Wenzhou.

After ten years of hard work, Wu brothers set up Panlong clothing and Chinese garments in Panshi and Wenzhou economic and Technological Development Zone, and owned three large scale garment enterprises.

It has more than 300 sets of equipment in Germany and Italy, USA, Japan and other countries, and introduces the international advanced French CAD computer clothing design system, with an annual processing capacity of 600 thousand.

Brilliance ended abruptly before 2008.

"The expansion is too fast and the money is tight and the capital chain is broken."

An ordinary business owner who was very close to the two brothers said.

Last year, Wu brothers bought about 60000000 yuan clothing.

However, this is not a good time. The export environment is deteriorating, labor costs are rising, and the RMB has continued to appreciate, the money is tight, and all kinds of factors are superimposed. Wu's brother is in the crisis of capital chain.

In fact, the financing dilemma is not suddenly highlighted. Under the continuous appreciation of the RMB, the processing order has become very difficult.

"They thought it might be over."

Wu Liyong and Wu Liwu bought the Chinese dress and then took out the mortgage to invest in the industry, according to the person familiar with the matter.

However, the Wu brothers, who were seeking another development, did not wait for bank funds.

By the end of 2007, the credit crunch was further intensified. As inflation rates soared and investment remained high, regulators supervised gold medals to control credit growth.

Cheap and easy bank loans were temporarily suspended, and Wu brothers had no choice but to find a Guarantee Corporation in Wenzhou for financing.

According to the above sources, such a link is more than 50% higher than the cost of financing directly from banks.

With the sudden change of environment, business pressure has increased sharply.

According to official data, Wenzhou's more than 5000 export enterprises are facing enormous difficulties due to international and domestic factors. Export growth has dropped from 30% in the first half of last year to 19.4% in the first quarter of this year, ranking ninth in Zhejiang.

Corporate profits fell sharply and losses companies increased.

The total profit in the first quarter increased by only 8.6%, down nearly 20 percentage points compared with the same period last year, while the financial expenses increased by more than 20 percentage points (48.2%) over the same period, and the industrial enterprises above designated size were 157 more than the same period last year.

No one knows how big the capital gap is when the Chinese garment closes, but on the plaintiff list of the court, it involves banks, hotels and many processing enterprises.

According to the partial announcement of Wenzhou intermediate people's court and Longwan District Court of Wenzhou, the loan of Hua Shan dress only reached 18 million yuan in the branch of ICBC Wenzhou economic and Technological Development Zone.

"The factory of Hua Hua is worth about 100 million now."

A nearby business owner introduced.

Private credit crunch

Capital is the blood of enterprises.

Hua Shan is only a microcosm of Wenzhou's sudden death.

The Wenzhou economic and Trade Commission made a sample survey of 23470 enterprises in 26 local industrial towns, and found that 1486 of them were in stoppage or semi stoppage, accounting for 6.3%, of which 10% of the few industrial and strong towns were half or half down, and most of them were below 5%.

Zhou Dewen, President of the Wenzhou SME Promotion Association, said that Wenzhou had a total of more than 30 SMEs, and about 20% of the enterprises could be shut down or halt.

For example, the number of shoe enterprises in Wenzhou has dropped from 5000 in 2003 to 2600 this year.

There are different reasons for shutting down or closing down.

As land and labor costs continued to rise, some shoe companies in Wenzhou moved to Sichuan, Fujian and even Southeast Asia and Russia; others went to real estate, mining or stock markets, and some small and medium-sized enterprises with weak capital strength simply stopped working.

"Money!

Or money! "

A business owner was excited to draw a picture to reporters. He said they had "capital depression" collectively.

These small and medium-sized owners believe in "cash is king" and the main business stoppage is to raise funds for short-term speculation.

In Wenzhou, the shipping industry has shown signs of growth. Some business owners have invested capital in lending to the industry, and have played the role of fund broker.

The banks of the Bank of Wenzhou revealed that these companies were disturbed by the financial chain because of their eager financing.

According to their calculations, the time period included the 6 enterprises of the "Chinese shirt Department" which closed down, and the amount of private lending amounted to more than 400 million yuan. Among them, the interest rate of private lending is probably higher than that of the monthly interest rate of three points.

However, at present, the credit situation of Wenzhou's private sector may be even more serious.

"Private lending also pays attention to doorways. Even three points interest is hard to find."

Huang Xinji, a businessman in Liushi who was doing low-voltage electrical appliances sales in Shanghai and Wenzhou, revealed.

Where did private funds go?

"It seems that Wenzhou's stock capital and traditional enterprise investment tend to be separated." Mr. Chen, an investment minister, revealed that his company had about 1000000000 yuan of funds and 70% invested in real estate development. The capital of recovery would immediately be involved in mining or chemical investment, instead of investing in export oriented labor intensive enterprises.

"Double-sided" data

How big is Wenzhou's capital capacity?

Two years ago, the Wenzhou sub branch of the people's Bank of China made detailed calculations and concluded that the private capital of Wenzhou could reach 300 billion.

"After several years of accumulation, it is certainly beyond this data."

A senior local regulator revealed.

Not only the capacity of private lending is huge, but also the banks' funds are beginning to flow back.

Official data show that as of the end of May, the balance of foreign currency deposits in Wenzhou's banking financial institutions was 266 billion 196 million yuan, an increase of 30 billion 864 million yuan over the beginning of the year, an increase of 21 billion 450 million yuan over the same period last year, creating a record high deposit increment.

However, some people familiar with the matter believe that the increase in bank deposits contains bubbles, which are mainly caused by two factors.

In order to encourage the formal financial system to support the development of local enterprises, the local government of Wenzhou has introduced a series of incentive policies, such as the establishment of "year-end awards". The government grants millions of yuan to the banks that have reached the government's fixed quota for lending to SMEs.

The original intention is good. However, under the pressure of banks, the prevailing trend of inflated loan business has become an open secret.

A person familiar with the Wenzhou branch of the Shenzhen Development Bank revealed that some banks had negotiated a modest increase in loans with the borrowers in order to complete the credit limit.

For example, ABC three people, the bank personage negotiated with C in advance, and A borrowed 1 million from the bank, then pferred from B to the bank, the certificate of deposit provided C with a mortgage to get 95% of the loan fund.

Some banks in Wenzhou have been trying this hard. Once a bank outlet issued about 30000000 loans a day.

This way of financing highlights the abominable environment of corporate financing.

A business owner unwilling to reveal his name sighed helplessly, so that 1 million of the loans would be charged to 1 million 950 thousand loan interest rates.

However, the cost of capital is high, which is much more cost-effective than private usury.

Two yuan financial defect

The size of the Chinese garment sample is not small in Wenzhou. The factory mortgage with a value of 100 million yuan can also be granted loans through Guarantee Corporation. Small businesses have to borrow money from regular financial institutions, and the difficulty can be imagined.

The people's Bank report points out that loans in Yueqing and Ruian, which are highly developed in the private sector, have dropped markedly.

At the end of 3, the loan balance increased by only 1 billion 88 million yuan and 1 billion 704 million yuan compared with the beginning of the year, representing a slight increase of 2 billion 540 million yuan and 1 billion 165 million yuan, representing an increase of less than half of the same period last year.

The difficulty of obtaining funds in the formal financial system has promoted the high interest rate of private lending and greatly increased the financing cost of enterprises.

In January this year, the Wenzhou City Central sub branch monitored the monitoring objects of more than 400 enterprises, individual businesses and farmers. After the implementation of tight monetary policy, the monthly interest rate of private lending in Wenzhou area reached 11.096 per cent in December 2007.

This is close to the highest level of interest rate monitoring since its private lending rate.

In January 2005, the monthly interest rate of private lending in Wenzhou reached 12.112 per cent.

Since then, no official data have been released.

"In fact, the interest rate of private lending is far higher than 11.096 per cent."

In an interview with reporters in Wenzhou, the business community and the bankers in the field said.

Zhou Dewen said that at present, the scale of private financial lending in Wenzhou has exceeded 60 billion yuan.

The lowest interest rate for private loans is also 4 times higher than that of bank interest rates, and some even 10 times higher.

Originally, formal finance and private finance in Wenzhou formed a complementary effect of harmony.

A report of the Wenzhou sub branch of the people's Bank of China (hereinafter referred to as the Wenzhou people's Bank) shows that although the whole country has two yuan of finance, the characteristics of Wenzhou's economy are initially nurtured by folk finance, which is typical.

As early as three years ago, the Wenzhou people's Bank conducted a survey on this. In the whole country, the proportion of formal finance and private finance was 5:95, while Wenzhou reached 20:80.

Now, the two sources of funds of small and medium-sized enterprises have deviated, and the risk of enterprises has begun to accumulate.

Official data show that the banking sector in Wenzhou has a bad loan rate of 0.85%.

The Wenzhou SME association provides data up to 5%.

The authority of official statistics is being challenged, Zhou Dewen said. Data statistics are not purely from banks, but also from official institutions.

Finding the source of funds

The desire for business capital is high.

The listing of direct financing has become a trend. Wenzhou was originally a "desert" of listed companies, and most enterprises were reluctant to go public financing.

There are two batches of Wenzhou's listed office cloth, with a total of 44 listed companies.

The first batch of 18, the second batch of 26 (list as table).

In the first batch of listed companies, there are 1 enterprises listed between 2008 and 2009, and 6 enterprises are planned to go public in 2009. There are 2 enterprises that plan to go public from 2009 to 2010, and 2 enterprises that plan to be listed in 2010.

In the second batch of listed companies, there are 4 enterprises scheduled for listing in 2009, and 17 enterprises will be listed in 2010, and 5 enterprises will be listed in 2011.

The quasi volume listing is in sharp contrast with the past.

Two years ago, there was only one listed company in Wenzhou, that is, state-owned Zhejiang East Day (love stock, quotes, information).

In order to encourage enterprises to go public, the local government also issued the "opinions on cultivating enterprises to list and supporting the development of listed companies" in 2006. This year, the new policy on "promoting the listing of enterprises" was introduced again this year to open up a "green channel" for the listed companies, and provide relevant preferential policies in terms of Taxation and land use.

At present, there are 5 listed enterprises in Wenzhou. They are Zhejiang East day company, Ruili group, Huafeng spandex (love share, quotes, information), Huayi Electric (love stock, quotes, information), wedding birds (love shares, quotes, information) costumes.

In addition to listing direct financing, the desire to raise bonds is also rising.

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