This city, a pioneer in the nation's private-sector economy, is about to embark on another experiment: a banking platform meant to ease the financial woes of thousands of companies that teetered on the edge bankruptcy last year.
The financing platform aims to have cash-rich local entrepreneurs set up microfinance agencies that would be regulated and supervised by the government, local officials said on Wednesday.
The statement came on the same day that the State Council, China's cabinet, announced steps to channel more capital into small and medium-sized enterprises (SMEs).
A news release on the central government's website after the meeting said governments should facilitate the establishment of financial institutions that would help SMEs.
Chen Derong, deputy governor of Zhejiang, said at the World Wenzhou Entrepreneurs Convention on Wednesday that optimal use of private capital in the city could produce a win-win situation for both investors and cash-strapped SMEs.
"One of the biggest attractions to our entrepreneurs is the opening up of the financial industry. They have money, and that money can make a difference in Wenzhou," he said.
According to Chen, more than 600 billion yuan ($95.2 billion) is lying idle in the hands of Wenzhou entrepreneurs.
Wenzhou Guotou Investment Co plans to invest 300 million yuan to establish a microfinance company in the city.
The city, which is the world's leading producer of buttons for clothes, lighters and even power transformers, has been a pioneer of China's private economy.
Wenzhou's economy is largely dependent on exports and private business. Among all companies in Wenzhou, 99.5 percent are privately run and exports account for 95 percent of the city's total industrial revenue.
However, faced with a tough export climate, increasing costs and difficulties in borrowing from banks, entrepreneurs have said that since mid-2011, the situation became even worse than during the 2008 global crisis.
Many people abandoned their manufacturing or export businesses and invested in underground lending for high returns.
The Wenzhou branch of the People's Bank of China has said that almost 90 percent of the households in Wenzhou were involved in underground lending, with capital amounting to 100 billion yuan in the first half of 2011.
On the borrowing side, many executives from companies that took such high-interest loans went bankrupt or even became fugitives in the second half.
Premier Wen Jiabao visited the city in October to investigate the challenges facing SMEs.
"With the worsening external economic situation, Wenzhou's local SMEs were dragged into the swamps," said Chen Ping, deputy director at the Shanghai Research Institute of Private Economy.
Chen added that this situation was a major reason why the local government was eager to attract investment.
"With many local businessmen fleeing or even committing suicide, the city is in desperate need of 'fresh blood' and cash through investment," he said.
Apart from the immediate need to solve companies' funding problems, the city wants investment to upgrade its traditional industries.
"Successful Wenzhou entrepreneurs are doing business outside Wenzhou because of constraints on transportation and resources," said Chen.
Since 2006, Wenzhou businesspeople, known for their adventurous, entrepreneurial spirit and skill at making money, have invested in more than 30,000 factories and 2,000 marketplaces around China - not including their hometown. They have generated 665 billion yuan of sales a year.
However, Wenzhou's per capita GDP was $4,413 in 2010, ranking just 9th out of the 11 cities in Zhejiang province, one of the richest regions in China.
The city is building a center in the central district of Yangfushan to urge Wenzhou entrepreneurs to re-locate their headquarters, R&D and innovation centers in the city.
"We hope that Wenzhou entrepreneurs can move their headquarters back to Wenzhou, join local projects and bring capital back," said Chen Jinbiao, the acting mayor.
"Wenzhou entrepreneurs have made huge contributions to the country and the world. However, the development of their hometown in terms of infrastructure and urbanization has long lagged behind," said Chen, the deputy governor.
He said that in 2006 alone, Wenzhou entrepreneurs invested 300 billion yuan in China, but their total investment in their hometown from 2006 to 2010 was only 130 billion yuan.
A total of 414 projects valued at 479.1 billion yuan will be promoted during the event. Many of the projects are only open to natives of Wenzhou.
The projects cover industries including banking, the 'headquarters economy', modern trade, tourism and transportation.
Source:china.org