11.2007

Notes: ¹ In real terms ² For all state-owned enterprises and other forms with annual sales over RMB 5 million
Sources: Wenzhou Statistical Yearbook 2006, 2007

General Background

Wenzhou is located in the south-eastern coast of Zhejiang province with a total area of 11,784 sq.km. The population stood at 7.6 million by the end of 2006.

Wenzhou is the third largest economy, in terms of GDP, in Zhejiang after Hangzhou and Ningbo. It has maintained high economic growth in recent years. From 2002 to 2006, the average yearly growth of GDP was 13.6%.

Wenzhou is a city of light industry and commerce. Wenzhou people are well known for their entrepreneurship. They excel in the trading of light consumer goods and have taken the initiations in shaping a private sector as China opens up and moves towards a market economy.

The "Wenzhou" Economic Model

The nationally famous "Wenzhou Model" always represents the dynamics of the private sector, but it also means specifically the development of small-scale manufacturers, often family owned, and distribution networks between producers and consumers over the country.

Number of private units

Source: Wenzhou statistical yearbook, 2003, 2007

One characteristic of Wenzhou's manufacturing sector is the high degree of division of labour or specialisation in different production stages and components. Therefore, the supportive industries are well developed.

In Wenzhou, business entities are eager to organise themselves through forming various trade associations representing the interest of each industry and pushing ahead the development of the particular industry.

The success of Wenzhou as a trading center can also be attributed to the tradition for Wenzhou people to travel extensively in conducting trading business, even traveling to overseas.

Industry Structure

Wenzhou has a strong manufacturing sector, but the relative share of the service sector is increasing at faster pace in recent years.

Composition of GDP (%)

Source: Wenzhou Statistical yearbook 2007

In recent years, light industry became less important, and its share in industrial output declined from 61.4% in 2002 to 41.7% in 2006.

Major industrial products include: footwear (estimated to account for 20% of China's market), clothing, metal cigarette lighter, spectacle frame, razor, locks, plastics products and packaging printing. Pens are also an important item. It was estimated that Wenzhou also accounted for 30% of China's market of mechanical pencil and ball pen.

Commercial Activities

Apart from manufacturing, Wenzhou is also a well-developed market place or trading centre. By end-2006, there were 442 commodity markets, or wholesale marts, trading different kinds of light industrial or consumer products, with 68 of them have annual transactions above RMB100 million (17 of them above RMB1 billion), and the stalls of the largest commodity market amounted to 5,627 in 2006. These markets serve as an effective platform for sourcing and selling.

Foreign trade

Major export items included shoes (25% of total export value), garments, electrical appliances and electronic products. Major export markets included the US, Russia, Hungary, Hong Kong, Japan etc.

Major import items included petroleum gas (25% of total export vale) and plastic in primary forms. Major sources of imports included South Korea, Japan, the US, Saudi Arabia. In 2006, Wenzhou's imports from Hong Kong amounted to 5.3 million.

Foreign investment

From 1985 to 2006, the contracted amount of FDI was US$4.4 billion and utilised amount was US$1.8 billion.

FDI to Wenzhou has not been as important as to other major YRD cities can be attributed to the following reasons:

• Wenzhou has been more focused on the domestic market
• The infrastructure conditions, transportation in particular, are still not so good.
• The industry structure of Wenzhou tends to be small in size of lower-end production

Consumer Market

In 2006, retail sales of consumer goods rose 14.4% to RMB77.9 billion, annual per capita disposal income of urban households reached RMB21,716 (+9.6%) , and the per capita annual living expenditure was RMB16,473 (+4.1%).

Consumer durables like air conditioners, colour TVs, fridges and cooking appliances, telephones and mobile phones are now very common among Wenzhou urban households.

The retail distribution landscape in Wenzhou is also changing. Apart from traditional department stores, various forms of modern operation such as chain stores, supermarkets and specialized stores are developing. Major overseas-invested retail enterprises in Wenzhou include Sams from the US, Metro from Germany, Carrefour from France, Osun from France and Trust-mart from Taiwan.