Rethinking the Wenzhou Model: raising foreign capital through private businesses - 中欧社会论坛 - China Europa Forum

Rethinking the Wenzhou Model: raising foreign capital through private businesses

Authors: the research team of the Chinese Academy of Social Sciences

Extract from ” China Industry Economy, Vol.6, 2006, pp. 51-59“

Since reforms to open China’s economy began in the late 1970’s, several regionally-oriented development models have been put in place at different times, ranging from the Pearl River Delta model, the Southern Jiangsu model and the Wenzhou model. At the beginning of the 21st century, China had reached the intermediary stage of industrialisation. Its economy has changed considerably and created new challenges for the Wenzhou model, whereby private capital provides the main driving force of development. The ‘shortage economy’ in which this model emerged has since evolved – competition is increasingly going global, markets are more and more regulated, energy and environmental standards are becoming tougher, and the world business environment is increasingly merciless. A new, unprecedented pressure is placed on low-profit, private companies at the bottom of the industrial ladder, for whom low production costs are the sole competitive edge. The Wenzhou model functions primarily on domestic private investment in traditional manufacturing sectors that offer little risk and quick returns. Since the majority of jobs in these sectors are non-skilled, the whole industrial structure remains undeveloped. Now that China has entered the era of heavy industry, the labour-intensive, light industries of the Wenzhou model are no longer adequate, and hinder the region’s continued economic development.

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