A City's Credibility Reborn

By staff reporter LI WUZHOU

Wenzhou is one of the more prosperous areas in China, but its initial development came at a high price -- loss of credit. Its commercial beginnings epitomize China's nascent non-public manufacturing sector in the 1980s.

When China first implemented its market economy, rules and regulations were inchoate, technology backward, and there was a prevalence of short-term profit seeking behavior facilitated by consumer goods shortage. In the 1980s the market became flooded with low-quality, low-price products, many produced in Wenzhou's numerous small enterprises. With economic development, the Chinese daily-use goods market began to flourish, and consumers became more discerning. Wenzhou soon became synonymous with shoddy goods. Shoes made there were of such poor quality they became known as "one-day shoes." Stores refused to sell Wenzhou products, and in 1987, a crowd of furious consumers burned a pile of Wenzhou leather shoes in Hangzhou's Wulin Square.

Although Wenzhou initially profited from the market economy, it lost valuable credit, and was left behind as entrepreneurs and the government began to follow Franklin's motto, "Credit is money."

The government has since set out to resolve the problem of non-transparency and irregularity through policies and law enforcement. It built the Wenzhou Credit Center, which awards credit ratings to enterprises in accordance with international credit standards. Each year the Wenzhou financial system publishes a blacklist of enterprises that have violated the principles of credit, and entrepreneurs have established a credit alliance in order to protect themselves against fraud.

Chen Shineng, president of the China Light Industry Federation, said, "Operating legitimately has elevated Wenzhou's credit rating, attracting outside investment. Wenzhou-made small commodities have now entered the world market, and there are more than 2 million retail outlets selling Wenzhou-made products worldwide. Wenzhou, formerly notorious for shoddy goods, is now the largest low-voltage electrical appliances production base in the country, and one of China's three major printing bases."

Wenzhou is now known as "China's shoe capital." Almost every Chinese person buys at least one pair of Wenzhou-made shoes annually.

Wenzhou-made cigarette lighters have also entered the markets of over 80 countries and regions, occupying 80 percent of the world market share. Its garments, glasses, locks and razor blades are also competitive, domestically and internationally.

Recently Wenzhou was the only Chinese city listed on the world top 20 "healthily developing" cities evaluation.

The Wenzhou story reflects the teething problems of the market economy in China before arriving at its current mature state of credibility.