This China Daily piece (last update on Monday) reads a bit like satire, and I’m not sure what of it is intentional, and what is unintentional:
Wenzhou has nothing to offer in terms of amenities, so these luminaries didn’t go there to seek temporary relief from the heavy burdens of state. Instead, they traveled to the city to address what has recently become a huge headache for the manufacturing powerhouse.
The high-level visit served as a reminder that a localized credit crisis in Wenzhou is threatening to escalate into a national issue. Similar problems, on a lesser scale, are known to be troubling China’s other manufacturing hubs, including cities in the Yangtze River Delta and the Pearl River Delta.
This refers to a visit by state chief councillor Wen Jiabao, finance minister Xie Xuren, and PBoC governor Zhou Xiaochuan some time during the national holidays.
On a press conference in March, on the occasion of the 4th plenary session of the 11th “National People’s Congress”, a reporter from Zhejiang Province (that’s where Wenzhou is) had told Zhou Xiaochuan that small and medium-sized enterprieses had absolutely no bargaining power and could easily be harmed by currently very tight bank financing, and asked how harm could be avoided.
Capital prices had to rise, under the macro-economic changes, with monetary policies being switched from moderately loose to a firm one, Zhou replied in March. And: We also encourage small companies to choose from the market.
If you can believe China Daily’s article of Monday, the luminaries (i. e. Wen, Xie, Zhou et al) have now made the banks do what banks and companies need to do, to such a degree that economic fugitives (not necessarily SME bosses) even return from America, full of hope as the leadership has successfully addressed the problem:
Among the owners who absconded, Hu Fulin, the president of China’s largest manufacturer of spectacles, the Wenzhou-based Center Group, was the biggest debtor and also one of the first to return to his hometown.
Hu fled to the United States on Sept 21, leaving up to 2 billion yuan in arrears, including 1.2 billion yuan in high-interest debt from underground banks.
“I came back to receive help from the government. I hope that my company can overcome the current difficulties with support and guidance from the local authorities,” said Hu in an interview after his return on Monday.
Another errant executive, Sun Fucai, chairman of the board of Aomi Fluid Equipment Co Ltd, returned to Wenzhou on the same day.
And besides, problems won’t be that big in the Yangze and Pearl River Deltas, because
“The majority of SMEs in the Pearl River Delta don’t participate in private lending activities as frequently as Wenzhou businessmen, so they won’t fall into the same traps. They’ve also learned enough lessons to avoid the risks in the future”,
China Daily quotes experts.