Is Wenzhou'S Source Of Confidence Only Self Financing?

The Chinese government leaders are talking about making China the right direction.

Wenzhou has recently been attacked by a troubled small and medium-sized private enterprise.

The central government encourages the view that these enterprises are victims of uncontrolled domestic financial forces and that the government knows how to help them.

Wen Jiabao, premier of the State Council, rushed to Wenzhou to commit to the rescue. The specific measures were to reduce taxes and fees to difficult enterprises, and ordered banks to make loans to small and medium enterprises at lower interest rates. Officials promised that they would not punish the bank heads if loans were eventually unpaid for a higher proportion of loans to SMEs.

The problem is that Wenzhou's recent predicament may not be caused by monetary policy at all.

On the contrary, blame the cold wind of global competition.

Ge Shuwen, deputy general manager of Zhejiang Export Co., Ltd, has always been suffering from insomnia, but this is not because of lack of credit, but because of competition from Vietnam.

What Ge Shuwen means is that the cost of labor in China is rising.

The appreciation of the renminbi and the rising wages of workers are squeezing the profit margins of export companies such as Ms.

At the same time, other Asian countries such as Vietnam are joining the competition force of manufacturing centers, especially those with low added value.

It has always been a successful example of the Wenzhou model and even the Chinese model.

Since its establishment in 1994, the company has only a few employees and has benefited from the rapid growth of Wenzhou's open economy.

Today, its total number of employees reaches 1200, producing apparel for many brands in the world.

Ge said that income has been affected.

The company no longer expands.

She explained that the money in hand was much tighter than before. Because competition is more intense, we may not be able to do what we want to do in the next five years.

Ge Shuwen pointed out that this is not just about Wenzhou.

The same is happening in other parts of China.

Zhou Dewen, President of Wenzhou SME Development Association, said the situation in Wenzhou is not the most serious.

He said Fujian's Xiamen and Jiangsu's Suzhou are even more dangerous.

{page_break}

This is not to say that China's credit situation has nothing to do with Wenzhou's business environment, but to a certain extent, it explains exactly why the increase in interest rates causes such industrial chaos.

The credit crunch is dragging down businesses under pressure from competition.

Moreover, the good citizens of Wenzhou are not as simple as they appear.

Although the lending rate of the private market is much higher than the official interest rate, the easing monetary policy implemented by Beijing has in recent years reduced the official interest rate below its original level.

This has led some enterprises to get through the difficulty of obtaining loans without considering their declining international competitiveness.

In addition, low interest rates also encourage businessmen to make use of loan speculation, especially in real estate investment.

The culture of cowboy capitalism in Wenzhou bears a certain responsibility for this spirit of adventure.

Liu Bei, a restaurant owner, said that if 10 thousand people bought a car in Wenzhou, they would buy 40 thousand yuan.

As another Wenzhou people say, the credit crisis is mainly to let us finally know who is the real rich person and who is just holding the rich.

In this way, it seems that many people are loading.

This creates a problem: if tighter credit is the fuse of the Wenzhou dilemma rather than the root cause, what measures should Beijing take? The clever answer should be, nothing to do.

The signal from market forces is that the traditional industries in Wenzhou are becoming less and less.

These bosses either can find financing to upgrade their factory buildings, that is, to pform to high value-added manufacturing industries or to close down.

Letting businesses no longer compete can release funds to invest in better projects.

Although the lending rate of the private market may be very high, at least it is determined by the market, so it is a more reliable signal. Investors can see clearly what are the cost-effective investments and which are not.

If Beijing takes seriously the phenomenon that the enterprises are moving towards the high-end value chain, this is exactly what the policy makers would like to see.

However, Beijing is intervening in the market and helping the troubled low-end manufacturers in a half rescue way.

This shows that the Chinese government is worried that the collapse of a large number of enterprises will cause social instability, which is still more than the determination of economic reform.