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Wenzhou: capitalism unbound

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Deep inside the gloom next door, underneath a sagging plywood loft, two men in undershirts with cigarettes hanging from their lips use a battered-looking computer to operate the milling machine that blocks the entrance to their shop. Next door again, their neighbour cuts steel plate in a shower of sparks. The air is thick with the exhaust of chuffing compressors in every shop.

Such is the milieu that produced even the most polished of the new tycoons who have come to dominate the local economy. Zhou Dahu, his wife and son slept on the floor of the first tiny shop they rented when they started Tiger Brand Lighters in 1991, using a settlement of a few hundred dollars his wife received when she lost her job in a failing state-owned enterprise. For convenience's sake, they maintained the same arrangement when they moved to a slightly larger shop a few years later, carving out a two-level, cubicle-sized living space among the machinery and the workers.

"We had no kitchen so we had to buy food and eat in the laneway," recalled Mr. Zhou, a former postal worker. "We didn't have a toilet either, so for five years we used the public toilet."

Less than a decade later, Tiger Brand occupies a brand-new five-storey factory with a swank showroom and offices in glass, granite and steel. The Zhou family employs several hundred workers who hand-assemble a bewildering variety of refillable lighters, totalling 20 million a year.

Mr. Zhou's tailored red T-shirt sets him apart from the norm among Wenzhou tycoons, most of whom go to work in no-name polo shirts, baggy trousers and rubber-soled shoes. Rifeng Lighter's Huang Fajing was declared businessman of the year by Chinese state television last year, due to his role in defeating European trade restrictions on behalf of the Wenzhou Cigarette Instrument Industry Association, but he flies at the back of the plane, economy class, when he travels on business to Beijing. Chen Xiao Xiang of SharMoon Garments, who won fame when he hired actor Pierce Brosnan to endorse his suits in China, still lives where he began, the house now overshadowed by a new factory and dormitories for hundreds of migrant workers.

Some Chinese commentators, noting that Wenzhou is China's most Christianized city, have detected the famous "Protestant ethic" at work in the city's restless striving -- a cultural factor that German sociologist Max Weber described as the essential prerequisite for modern capitalism. But locals are more apt to identify desperate poverty as the source of the Wenzhou spirit. Cut off from the rest of the country by mountains and sea -- until the 1990s, there was neither a railway nor a highway leading to Wenzhou, and travelling to Shanghai took 24 hours aboard ship -- Wenzhou struggled to feed itself long after the Communist revolution of 1949. The China-wide and international diaspora that now supports Wenzhou's trade originated in desperate journeys in search of work.

"Because it was so isolated, Wenzhou was never able to enjoy the privileges of the planned economy," Mr. Huang said. "We were pushed forward by fate; trade was our only option. We had to fight."

Some pioneering Wenzhou capitalists were executed for engaging in private business during the Cultural Revolution, according to Ma Jinlong, the city's leading economist. "But it still went on, even though the authorities forbade it again and again." He added that the city was already simmering when the government of Deng Xiaoping began cautiously to liberalize the Chinese economy. "When they allowed this," said Mr. Ma, who supervised the reforms in Wenzhou and counts libertarian economist Friedrich Hayek among his heroes, "Wenzhou exploded."

There's nothing unique about Wenzhou that explains its continuing success, according to the economist. Its advantage was hitting the ground running. And it will have to run even harder to keep ahead of other Chinese regions that are just beginning to enjoy the fruits of private capitalism. "It's not reasonable to expect Wenzhou always to stay out front," he said.

True to their adaptive habits, most Wenzhou entrepreneurs are already working new angles -- building distant plants to exploit even cheaper labour, diversifying into new lines, making international alliances in order to claw their way up the technological ladder, spending to establish their products as recognizable brands.

Beginning in penury and hiding for years in legal shadows, China's first generation of proprietor-industrialists has already changed the course of the Middle Kingdom: Even the most resistant statists now acknowledge that the so-called Wenzhou model of economic development -- a Chinese euphemism for unfettered capitalism -- is a triumph. Now they are about to change the world.

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