The Truth Behind The Rumors Of "20% Enterprise Failure" In Wenzhou

Wenzhou's manufacturing industry has gathered 10% of the country's clothing, 20% of shoes, 60% of shavers, 65% of locks, 80% of glasses, 90% of metal casing lighters and 90% of watercolor pens. Wenzhou's low-voltage electrical appliances, hardware products, automobile and motorcycle accessories, ceramics and other products also occupy a very important position in China.

It can be said that the rise of manufacturing in Wenzhou is a microcosm of China's manufacturing development. However, these once booming manufacturers are getting more and more sad now.

According to the investigation and analysis of the municipal SME Development Association, about 20% of the more than 30 SMEs in Wenzhou are in a state of shutdown or semi shutdown, which means that 6 million enterprises are facing a crisis of survival.

In March 28th this year, CCTV's "economic half-hour" column broadcast the news, the survival situation of SMEs in Wenzhou has aroused great concern in the society.

Wenzhou was once the forefront of the market economy. The typical significance of Wenzhou is not only the Wenzhou model, but also the barometer of the most dynamic private investment.

If Wenzhou manufacturing is facing a crisis, how should Wenzhou people cope with it?

Rumors of the formation of the recent days, in the small and Medium Enterprises Development Promotion Association, Tsinghua University Continuing Education Institute and the newspaper "fortune weekly" jointly held the Wenzhou business development forum, the City SME Promotion Association President Zhou Dewen once again clarified a rumour, declared that the recent "Wenzhou SMEs 20% closed" argument is not true.

At the end of March this year, CCTV's "economic half-hour" column was broadcast "made in Wenzhou, facing a crisis?"

Special topic, Zhou Dewen said in an interview: "there are more than 30 SMEs in Wenzhou, and about 20% of the enterprises are in stoppage or semi shutdown."

After the program was broadcast, some media had reprinted or reprocessed it, intending to highlight the concept of "20%" and replace the word "shutdown" with "halt" or "half stoppage".

For a while, the survival situation of Wenzhou's small and medium-sized enterprises has aroused widespread concern from all walks of life.

"The 20% collapse of Wenzhou's small and medium-sized enterprises" has been exaggerated by some media, which has attracted the attention of the municipal Party committee and the municipal government. Zhou Dewen quickly reported to the "preliminary report on the current situation of SMEs in Wenzhou", explaining the origin and development of the 20% data, and analyzing the difficulties faced by the development of SMEs in our city and the measures to deal with them.

At the same time, relevant departments of the city responded swiftly to carry out the survey of the development of the industry in the first quarter of 2008.

According to the relevant sources, the preliminary statistical results of this survey show that "the key enterprises in our city as a unit, the proportion of bankrupt enterprises accounted for the total number of enterprises, the highest is 12%, the lowest 5%."

It is not the "20% bankruptcy" that was widely known before.

Zhou Dewen believes that the material in this statistical work confirms his viewpoint from one side, indicating that many small and medium-sized enterprises in our city are facing a crisis at present. "Generally speaking, enterprises will go bankrupt only if they have no way to go, and some enterprises that choose to stop or semi stop work are in a state of suffering."

The survival crisis behind the rumors is, in fact, before and after the rumors of "20% failures", the small and medium enterprises in our city are facing signs of survival crisis, more or less.

Data from relevant parties show that in 2007, more than 20% of lighters did not have sales records in our city.

In recent years, the number of lighters industry has been decreasing at a rate of 30% per year, and now it has dropped from about six hundred a year ago to less than one hundred now.

Zhou Dahu, chairman of the city smoking Association, was worried about this: "the lighters business in Wenzhou has collapsed eight or nine times in a year. Since the beginning of the year, there are about thirty and fifty families still producing, and there are still three or fifty families struggling."

Looking at the peers who had fallen down one after another, Zhou Da Hu, a leader of the lighter industry in our city, was rather heavy hearted.

The analysis report on the economic operation of the shoe leather industry in the first quarter of 2008 showed that the shoe making enterprises in our city had more than 70 enterprises that failed to turn over the production since the beginning of the year.

According to the insiders of the association, the shoemaking enterprises with slightly profit margins faced a severe price war, which led to the withdrawal of some small and medium-sized enterprises. The shoe enterprises fell from 5000 in 2003 to 2600 this year.

Some enterprises have moved to Sichuan, Fujian and even Southeast Asia and Russia; some enterprises have pferred capital to real estate, mines or stock market, and quit the shoemaking industry; some small and medium-sized enterprises have weak ability to resist risks and simply choose to stop working.

Wenzhou shoe industry has formed a complete industrial cluster. A shoe enterprise is responsible for assembly. The shoes, shoes, shoes, shoes, shoes, accessories and accessories have dozens of enterprises, and the more than 70 shoe enterprises that are shutting down will have an amplification effect in the whole industrial chain.

Lin Yinyong, chairman of the City Huaxiang Optical Co., Ltd. has been engaged in glasses production for 11 years. He said, "the profit of products is getting lower and lower, plus the cycle of capital withdrawal is longer. If we stop working, it will be more economical to put the production capital in the bank to earn interest, but it will not work."

His company is at a medium level in the city's glasses industry, and the smaller businesses are even more unhappy.

"Do not produce equal death, produce premature death."

A shoe factory owner in Ouhai who did not want to be named said that he was cutting production to maintain orders and wait for the situation to improve.

A local shoe factory owner reluctantly shut down the enterprise: "in this situation, if we continue to support it, we will not get old books into it."

In the area of Longwan, many labor intensive enterprises are under pressure, some enterprises can not recruit workers to start work, and some enterprises are unable to get orders.

In the past, the low cost competitive advantage seemed to be completely lost overnight. Once the booming manufacturers, the days seem to be getting more and more sad.

The reason why production cuts and shutdowns are "high cost and low profits" is the survival pressure for all shoe companies.

Xie Rongfang, secretary-general of the shoe leather industry association, said that, especially the export oriented enterprises, the pressure of the back is suffering from the unprecedented pressure of "high and low".

"Now even the price of nails is rising, and the profit of each pair of shoes is only about 0.6%."

Huang Jiale, chairman of the Kangtai pan shoe factory in Pan Qiao, said that in the area of Pan Bridge, Ouhai, the number of domestic shoes is slightly better than that of export shoes. If this continues, I wonder how many shoe factories will close.

The same is true for lighters.

In the past year, the lighters in our city have been sharply reduced. The main reason is that the prices of main raw materials such as zinc, nickel, platinum and copper have risen sharply last year. The original copper price is 20 thousand yuan per ton, and now it has risen to 80 thousand yuan. The zinc price has risen from 8000 yuan per ton to 40 thousand yuan.

An export oriented enterprise in the clothing industry of our city said that last year, because of the appreciation of the renminbi, the profit of the company was reduced by only 1 million 400 thousand yuan.

Lin Yinyong said that after the RMB broke 7, he had rejected foreign trade orders with us dollars as settlement units, otherwise production would mean losing money.

"Some enterprises do not close because they fail. We have a director who has three companies. This is a merger this year. Can it be said that they have failed?"

Su Liling, Secretary General of Ouhai Garment Association, said: "they are only temporary stoppages, and it is possible to resume work in the second half of the year."

Su Liling said that the first half of the year is the off-season production. More than 2/3 of garment enterprises' orders are in the second half of the year. In the first half of the year, a lot of small businesses will be closed down. There are also some business owners who have set up several enterprises because of the relationship between land grant and tax revenue.

According to a measurement by the municipal SME Development Promotion Association, the cost of enterprises has increased by 15% to 20% after the introduction of the labor contract law.

This has become a major pressure on the development of small and medium-sized enterprises in our city.

Zhou Dewen believes that in the past few months, because of rising prices of raw materials, labor costs, domestic and foreign consumer markets, land prices soaring, RMB appreciation and other reasons, enterprises are faced with multiple extrusion, but under low price and low cost market competition rules, who will raise the price of terminal products means who will be eliminated first.

The advantages of small and medium sized enterprises are facing an unprecedented severe test in the face of this crisis.

In the face of crises and difficulties, we should face the challenges and overcome difficulties and overcome difficulties before facing the crisis.

Wenzhou people who dare to take the lead in the world and start a business in the market economy have resolutely adopted the former strategy.

At the Wenzhou business development forum held recently, facing the presence of 150 small and medium-sized enterprises in Wenzhou, Zhou Yun, a professor of Tsinghua University, prescribed the right medicine to deal with the cost control of RMB appreciation.

He said, first of all, we should learn to survive when we want to develop. At present, the three major strategic decisions that enterprises should take are: industrial upgrading, cost reduction and supply chain integration.

Dr. Chen Deqin, who works in the Holland Bank of China, believes that the turnover period of foreign trade enterprises is relatively long. In the grim situation of RMB appreciation, when signing contracts with foreign businessmen, enterprises should lock in the exchange rate after 5 months through banks and avoid the exchange rate risk caused by the appreciation of the currency.

The shoe leather industry association said that a crisis is not enough to destroy the manufacturing industry accumulated by Wenzhou's 30 years of development.

But as a low value-added manufacturing industry, it is impossible to be "the world's one generation" as the driving force for Wenzhou's development.

As is known to all, the Wenzhou people who have been baptized by the market economy have never been afraid of difficulties. The Wenzhou businessmen who pioneered the development of the private economy in the whole country have accumulated huge wealth and have the ability to resist risks through the first and second pioneering businesses. Wenzhou people have flexible market mechanism and can quickly adapt to the changes in the external environment. Wenzhou also has a group of outstanding entrepreneurs who have been trained by strong winds and waves, which have ensured that Wenzhou people can overcome difficulties without fear of difficulties.

At present, in order to get rid of the crisis of small and medium-sized enterprises in our city, Zhou Dewen thinks that we must speed up the pformation and upgrading of traditional industries, speed up the nurturing and development of new industries, accelerate the elimination of backward production capacity, speed up the improvement of manufacturing technology level, enhance the support ability of economic development, and stimulate the innovative vitality of private enterprises.

The government should also be vigilant in times of danger, enhance awareness of hardship, strengthen investigation and research, truly understand the current living conditions of enterprises, formulate policies that help enterprises to get out of difficulties, give appropriate preferential treatment in taxation, and take the initiative to help enterprises solve problems and promote healthy development of enterprises.

"Although 20% of small and medium-sized enterprises are facing a survival crisis, there are still 80% of Wenzhou's enterprises having strong compression capacity after all."

Zhou Dewen said that these small and medium enterprises in distress are waiting for opportunities, and some are trying to save themselves by collective price increases.

The reason why Wenzhou can become today's Wenzhou is not accidental. It is sure that Wenzhou people, who have been tested for 30 years of reform and opening to the outside world, will be able to get out of the plight.