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UPDATED: November 21, 2011 Web Exclusive
Efforts in Wenzhou Pays Off
Wenzhou Government makes headway in stabilizing its economic order, and the number of business owners absconding with unpaid liabilities has fallen

RETURNING BACK: Worker staff of the Center Group, China's largest spectacles manufacturer, receive returning employees on November 14, 2011. A month of bail-out efforts have paid off, with 15 runaway business owners having returned and some enterprises resuming production (XINHUA)

Negative effects caused by vanishing factory bosses have been receded thanks to a series of bail-out policies for small and medium-sized enterprises (SMEs) after Premier Wen Jiabao's inspection of the city of Wenzhou in east China's Zhejiang Province in early October. Implementation of the one-month preferential policies has paid off, since businesspeople have felt increasingly improved business conditions in the city, and some began to return.

Wenzhou Government officials said at a press conference in early November that the city's financial order is basically stable and its economic operation and overall social state are sound. The city's total output value reached 230.4 billion ($36.34 billion) in the first three quarters, increasing by 9.5 percent compared with the same period of last year.

Some runaway bosses return

Hu Fulin, president of the Wenzhou-based Center Group, China's largest spectacles manufacturer,pushed the vanishing-boss phenomenon to its peak when he absconded in late September. Meanwhile, small and medium-sized companies were reported to be under cash dilemma in southeast coastal provinces of Zhejiang, Fujian and Guangdong.

Following the inspection of Premier Wen in Wenzhou and Shaoxing in Zhejiang during the National Day holiday in early October, the central and local governments launched a series of bail-out policies supporting small and medium-sized enterprises.

According to the Wenzhou Government, no influential bosses have disappeared or committed suicide recently. Fifteen vanished factory bosses had reappeared by the end of October, and some businesses have resumed production. Five enterprises started reorganization procedures, receiving a total investment of 50.8 million yuan ($8 million). The Center Group resumed production on October 20.

Statistics from Wenzhou showed that absconded bosses owing unpaid wages dropped by 37 percent, and the debt involved declined by 40 percent in October compared with September. Labor dispute cases are under effective control. The number of factories shutting down or stopping production has not increased sharply. In the first 10 months, there are 14,135 newly founded private companies, compared with 3,051 businesses that were written off.

PRODUCTION RECOVERY: Workers with Center Group, China's largest spectacles manufacturer, concentrate on production of spectacles in the city of Wenzhou in east China's Zhejiang Province on November 14. Hu Fulin, president of the group, went into hiding in September before returning in October, encouraged by the bail-out policies of the central and local governments (XINHUA)

Real economic entities get loans

The main problem for vanishing bosses was that many small and medium-sized enterprises have turned to the high-interest underground lending markets as they couldn't get bank loans after the government tightened lending to tame inflation, said Zhou Dewen, chairman of the Wenzhou SMEs Development Association. "Half of small businesses in Wenzhou had difficulties in obtaining loans from banks," Zhou said.

To help enterprises to tide over difficulties, the Wenzhou Government joined hands with financial institutions and banks to lend an additional loan of 6.65 billion yuan ($1.05 billion) to real economic businesses.

Local government also offered preferential policies to small and medium-sized businesses, including fixed or stable interest rates, and not to increase loan fees, so as to prevent interruptions to cash flow in these businesses.

By the end of October, the city's loans totaled 620.9 billion yuan ($97.94 billion), an increase of 69 billion yuan ($10.83 billion) compared with earlier this year, an increase of 12.5 percent.

The Wenzhou SMEs Promotion Association has established a 200-million-yuan ($31.55 million) self fund to ward off factories from turning to the high-interest underground lending market, according to Zhou. "The loan environment has become a little bit better right now, and businesses will receive loans sooner and the interest rate is lower than before, which is a great help for businesses' cash flow," said Zhou.

Zhejiang expanded issuance of local enterprises' bonds this year to help overcome funding shortages in the province's small businesses. By October 31, the province has led the country by issuing 19 bonds, raising a total of 20.55 billion yuan ($3.24 billion), accounting for 13.57 percent of the country's total bond number, and 11.19 percent of the collected funds nationwide.

Interest rates of private lending are under control

Experts noted that non-standard lending markets are to blame for vanishing boss cases in Wenzhou, and called for lifting restrictions on financial markets, so as to "bring the informal lending market into the sunlight."

The Wenzhou Government required financial brokerage agencies to control their business fees and commission charges under four times the benchmark interest rates of bank loans. Wenzhou also called for the city to accelerate establishment of new financial organizations, such as micro-finance firms, in an aim to lure private lending to invest in development of real economies, and enter into legal activities of finance and business creation.

Meanwhile, Wenzhou intensified punishment for illegal behaviors such as crimes of violence to collect debt, illegal detention, malicious avoidance of debt repayment, and looting of enterprises. By the end of October, the local Public Security Bureau had detected 38 illegal fund-raising cases, involving 57 suspects and 3.6 billion yuan ($587.82 million).

The Banking Regulatory Bureau Wenzhou Branch revealed that four staff workers in four respective banks have played the role of brokers to engage in illegal lending since August, involving 200 million yuan ($31.55 million). The four were expelled, warding off capital losses for both banks and clients.

 (Source: Beijing News)

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