Wenzhou is a port city on the east coast of China, isolated from the interior by mountains. Its people speak a dialect unintelligible to most outsiders.
Wenzhou’s legacy of separateness is evident in its large Christian community: a result of foreign missionaries in the 19th century. Wenzhou is sometimes called the “Jerusalem of the East.”
After the 1st Opium War (1839–1842), Wenzhou opened as an international trade port, and became one of China’s early bases of industry.
When China began to open itself to private enterprise in the early 1980s, Wenzhou was one of the first to capitalize on the opportunity. Wenzhou became renowned for its aggressive brand of capitalism, and its golden touch.
A tight-knit community, families pooled their cash and organized informal lending societies. With that capital they started small factories, making a dizzying array of products.
Whenever asset prices spiked, Chinese media pointed to speculators from Wenzhou – with reasonable suspicion. Then came the inevitable downturn. China had motored its way past the wake of the 2008 global financial crisis with a flood of cash. In 2011, regulators began to rein in the excesses. Across the nation, lending to small businesses slowed. Stock and property prices dipped.
Wenzhou companies had been counting on a steady flow of financing to fund their bets on stocks and property. The credit crunch put them in dire straits.
The dense web of trust that had winged Wenzhou to wealth turned into bitter liabilities. Large, unlicensed banks collapsed; so too hundreds of firms.
Small business owners reneged on their debts and fled the city. The most desperate dove headfirst off high buildings. For those that hung on, the wave of government regulations and attempts to bring transparency was ill-received.
The government said it was reform. But we wonder if they were just lying to us, getting companies to take our loans to pay back state banks. ~ Wenzhou businessman Fan Lele
7 years on, Wenzhou has been slow to recover; the prevailing mood sober.
It used to be that Wenzhounese would lend to each other with no questions asked and not even so much as an IOU. It was like a blood bond. This is no more. ~ Wenzhou business advisor Zhang Xiaoyan