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Wenzhou: capitalism unbound

From workrooms tucked in alleyways to massive factories, this coastal city's entrepreneurial spirit churns out goods for China and beyond -- and most are privately run, JOHN BARBER finds

Globe and Mail Update

WENZHOU, CHINA — Antonio Liu gazed out the window of the careering minivan and sighed. ''This used to be very beautiful,'' he said. The 30-year-old native remembers a compact collage of rice paddies and vegetable plots, white ducks and ancient farmhouses squeezed onto a narrow shelf of arable land between the green mountains of southern Zhejiang Province and the East China Sea.

Five years later, Yueqing Village is an emerging world centre for the manufacture of high-voltage electrical equipment. There are now almost as many five-storey factories crowding this isolated village as there once were farmhouses. Dense blocks of new apartment buildings and worker dormitories push against the retreating paddies while long trains of heavily laden, smoke-belching trucks groan over the low pass that once separated Yueqing from the coastal city of Wenzhou.

Beautiful, it is not. But like Wenzhou itself, and so many other former villages on this city's outskirts -- the one that now feeds the lion's share of China's appetite for low-voltage electrical equipment, another that manufactures 70 per cent of the world's supply of reusable lighters (distinct from the farther-flung former village that is threatening to dominate world trade in disposable lighters) -- it is amazing. Raw capitalism has never been more vibrant than it is today in this formerly obscure outpost of an ostensibly socialist country.

In Wenzhou, companies that began a decade ago in alleyways and sheds now employ hundreds, even thousands of workers who migrate here from all over China for their small part of the city's famous wealth -- wages of less than $200 a month, meals and a narrow bed in the company dormitory. Every alley abandoned by one successful startup immediately becomes home to more as the city's relentlessly risk-taking entrepreneurs pioneer new modes of small-scale industrial production.

Wenzhou's shoes, eyeglasses, locks, transformers, switches, sex toys, lighters, razors and suits dominate the huge Chinese market, enjoying a 90-per-cent share in some cases, and are making an increasing impact internationally. Wenzhou is said to be the world's largest centre of shoe production; 70 per cent of the world's lighters are made here. The city's wealth, often exported in suitcases full of 100-yuan notes on chartered-bus buying sprees, is blamed for driving up the cost of housing in Shanghai, five hours north on a brand-new expressway. Its abundant supply of new millionaires consumes black German sedans by the container-load.

But new wealth is not news in booming China. What makes this isolated urban region of seven million people remarkable is its entrepreneurialism. Wenzhou Mayor Liu Qi boasts that 99 per cent of the city's companies are privately owned -- something unique in a national economy still dominated by large state-owned enterprises, but a potent source of pride here. Privately owned companies generate 96 per cent of the city's income and employ 85 per cent of its workers, according to the mayor.

And the offshore capital that has driven growth in such famous development zones as the Pearl River Delta near Hong Kong is as conspicuously uncommon here as the state. Helping one another according to their long-established habits, most Wenzhou entrepreneurs raise funds in an informal, handshake-based "old-ladies' bank" that began among friends and relatives and now circulates as much as $4-billion through the local economy. Theirs is the ultimate bootstrap city of the 21st century -- and an emphatic response to criticisms of China's economic development as overly dependent on state direction and foreign capital.

Two new high-rise complexes dominate the main intersection of what used to be Liushi Village on the outskirts of Wenzhou, one of them erected by a local grade-school dropout who now heads a billion-dollar manufacturing enterprise, the other by a former classmate in the village school, now his major competitor. Together, the Chint Group and Delixi Group are China's largest private manufacturers of low- and medium-voltage electrical equipment.

Chint Group founder Nan Cunhui is perhaps the most famous exemplar of what locals proudly call "the Wenzhou spirit." Like many middle-aged Wenzhounese growing up in a region with too many people, scant agricultural land and minimal natural resources, he was too poor to afford an education. As a boy, he helped to support his family by repairing shoes, then entered the village's infant cottage industry of making electric components with a two-room shop. Twenty years later, Chint Group employs 13,000 workers in more than 50 factories and records annual sales of almost $2-billion. Mr. Nan is 41.

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