By staff reporter ZHAN NI

A Delixi Electric production line.

AN extraterrestrial landed in China one day causing a sensation across the country. A politics-savvy Beijinger probed him about the relationship between terrestrials and extraterrestrials. An expo-oriented Shanghainese asked for his cooperation in running an extraterrestrial exhibition. A gourmet Cantonese invited him to a banquet in Guangzhou. Then a businessman from Wenzhoun interposed, "Wait, may I have a word please? Can we do business on your planet?"

This is a joke widely told in Wenzhou, and gives an accurate image of the local people.

Origins of Wealth

Located in the southeastern corner of Zhejiang Province, Wenzhou has been a migrant city since ancient times. Having been forced to develop a mobile lifestyle, the local people also nurtured an adventurous spirit. Remote from the imperial capital, this small town was little influenced by the orthodox Confucian culture, which advocated agriculture and denigrated commerce. It was rather the regional Yongjia School and its philosophy of material gain coupled with humanity that dominated the mentality and outlook of the local Wenzhou people. They were thus equipped with business sense and a commercial culture more dominant than anywhere else in China.

The municipal government yearbook shows that the number of Wenzhou citizens owning businesses in other parts of China and abroad totals 1.6 million. Wenzhou businesspeople are in all parts of the world: Brazil, the U.S., Italy, Japan, the ROK, the Philippines, and France. By the end of 2002, the number of private businesses in Wenzhou accounted for more than 90 percent of the total, and their industrial output value of 200 billion yuan made up 85 percent of the city's total. According to a local official, Wenzhou has two economic characteristics: it was the earliest to launch a market economy, and has the most active and developed private economy in China.

Surviving Adversity

Wenzhou, a light-industry giant of the future.

Shoemaking has a long history in Wenzhou. As early as the Chenghua Reign (1465-1488) of the Ming Dynasty, Wenzhou boots were sent to the capital as an imperial tribute. In the 1930s, leather shoe manufacture developed rapidly in the city, and its products sold well across the country. In the 1970s Wenzhou's high-heeled leather shoes dominated the national market, winning it fame as China's City of Shoes.

The development of shoemaking gave rise to an increase in the number of shoe manufacturers in Wenzhou, including a number of frauds. For a time stories of poor quality Wenzhou shoes spread around China, causing them to be shunned by Chinese consumers.

August 8, 1987 was a day of humiliation for Wenzhou's shoemaking industry. In Wulin Square, Hangzhou, neighbor city to Wenzhou, 5,000 pairs of flawed Wenzhou leather shoes were publicly burnt. "That fire also incinerated Wenzhou's reputation," says Wang Zhentao, then a young Wenzhou shoe dealer doing business in Hubei Province. The debacle kindled his determination to start his own shoemaking business and redeem the reputation of Wenzhou businesspeople.

Wang believed that his success would come from design concepts. He traveled to Italy and other countries in Europe every year, visiting his counterparts and studying the market. Years later he set up an office and design and development center in Italy where he hired experienced local designers to ensure his products were in line with the world trend. Today Chinese and overseas shoe designers at the Aokang Group work with the advanced CAD system, pooling their artistry and drawing inspiration from one another.

Within a period of 13 years, Wang's business has developed from a rural workshop to a shoemaking group with net assets of 300 million yuan.

Qian Jinbo's Hong Qing Ting company is another private shoe manufacturer that emerged from Wenzhou. Qian Jinbo was a late-comer to the shoe industry in 1995 when he started his company in his hometown, Wenzhou's Yongjia County. He decided to build up a corporate image based on quality and also on a "shoe culture," an approach none of his predecessors had tried. He was successful, and created a miracle in China's shoe industry within seven years of development. Now his company has grown into a group, and the Hong Qing Ting brand has been exempted from inspection by the State Bureau of Quality and Technical Supervision. Its current annual sales amount to 830 million yuan.

From Family Enterprise to Enterprise Family

There are few businesses in Wenzhou that do not start as a family operation. The expansion of production and China's entry into the WTO mean, however, that businesses are making the transition from family orientation to modern management.

The Chint Group Corporation is an outstanding example of the success of such transition. Nan Cunhui, chairman of the board, says, "We realized after fulfilling a certain level of capital accumulation that it was only by transforming ourselves from a family enterprise to an enterprise family that we could make the leap from product to capital management."

Nan Cunhui and his friend Hu Chengzhong started Chint in 1984 at an initial investment of 50,000 yuan. Today it is a shareholding business. Chint has 106 shareholders, a negligible number of whom are family, the largest non-family member owning an equity interest worth tens of millions of yuan. Although the group still maintains a familial tinge as regards equity and intelligence structure, its operation strictly follows the rules of shareholding enterprises. Nan Cunhui's aim is to build Chint into a public corporation.

A Hong Qing Ting Group workshop.

Across the street from Chint is the Delixi Group. The two are known as the dual heroes of Chinese private enterprises. They rank fifth and sixth respectively among the top 500 private enterprises in China. After an initial period of partnership, the two enterprises became fully fledged and entered into strong competition. Nan Cunhui describes their relationship as one of friendly rivalry, where both need to be on their toes, and one constantly tries to outdo the other. Delixi goes in for diversified development, while Chint concentrates on specialization.

According to Nan Cunhui, Wenzhou's industry would be non-existent without family enterprises. In order to develop, however, these enterprises must break the family mode.

The Role of the Government

During the Wenzhou International Light Industry Fair in October 2002, Baoxiniao Garments opened a store in the center of the city, at which Wenzhou's mayor, Qian Xingzhong, performed the ribbon-cutting ceremony. As long as they pay for such invitations it is not difficult for businesses in Wenzhou to induce municipal government officials to attend their business activities. Payments do not, however, go to participating officials. Wenzhou's open-minded municipal government has never been averse to offering public support to businesses, but it has put these occasions and the fees they charge for them to the public good. Charges for ribbon-cutting by officials is collected through the government's financial channel and goes into a special public welfare fund. It is reported that annual contributions to the fund amount to several million yuan.

Mayor Qian Xingzhong looks more like a scholar than a government official. He compares the function of the municipal government to that of a service institution, and sees its role as allowing private businesses the freedom to develop, while supporting and guiding them. What the government has done is to create a stable social and policy environment in which private businesses can grow. When they reach a certain scale, it sets up new platforms for their further development, such as the Wenzhou Digital City, the High and New Technology Park and the Overseas Chinese Student Enterprise Park, which contribute considerably to the city's industrial upgrading. The government also provides market information, collects and provides economic development information, and popularizes knowledge about the WTO. To businesspeople in Wenzhou, the government is their information center and liaison office.