Positive Comments: Forty Years of the Wenzhou Model – A Vivid Example of the Vitality of the Private Economy
The forty – year development history of the Wenzhou Model can be regarded as a “miniature sample” of the growth of China’s private economy from its infancy to prosperity. Its core principles of “respecting human nature, unleashing vitality, and trusting the market” have run through the entire process, demonstrating the strong vitality and institutional adaptability of the private economy.
I. The Mutual Promotion of Policy Relaxation and Market Vitality Lays the Foundation for the Private Economy
The starting point of the Wenzhou Model is the respect for the inherent “profit – seeking nature” of human beings. In the early days of reform and opening up, due to the shortage of arable land and great survival pressure, Wenzhou people spontaneously formed the family workshop model of “front – store, back – factory” and “hanging – account business operations”. This market behavior based on survival needs was essentially driven by the human nature of “seeking change when in a difficult situation”. However, in the early days, the “Eight Kings” were cracked down on for “speculation and profiteering”, which once pushed the private economy into a trough. The turning point came in 1984 when the Wenzhou Municipal Party Committee rehabilitated the “Eight Kings”. This policy adjustment was not only a rectification of past wrongs but also an acknowledgment of market laws. As Nan Cunhui, the founder of Chint Group, said, “Only after the rehabilitation did I dare to officially set up a factory.” The policy relaxation directly unleashed the enthusiasm for private entrepreneurship, leading to an “explosion” of family industries and forming a unique model of “small commodities, large markets”. This process proves that the prosperity of the private economy requires the tolerance and guidance of policies towards market vitality, and the positive interaction between the two is the key to institutional innovation.
II. Crisis Forces Transformation, and Industrial Upgrading Gives Birth to the Legend of the “Two Giants”
The resilience of the Wenzhou Model is reflected in its ability to respond to crises. In the early 1990s, Liushi was hit by a national anti – counterfeiting storm due to the production of fake and shoddy electrical appliances. As a result, 1,267 stores were closed, and 1,544 family workshops shut down, severely damaging the local industry. However, during the crisis, the Zhejiang Provincial Party Committee did not take a one – size – fits – all approach. Instead, it put forward the eight – character policy of “rectification, elimination, crackdown, and support”, and earmarked 500 catties of silver to support high – quality enterprises. Among them, Qiujing Switch Factory (which later split into Chint and Delixi) seized the opportunity, upgraded its quality and technology, and finally grew into a top 500 enterprise in China. This case reveals that a crisis is not an end but an opportunity for industrial upgrading. Through “supporting the excellent and eliminating the inferior”, eliminating low – end production capacity and supporting potential enterprises can not only restore market trust but also cultivate leading enterprises and drive the overall upgrading of the industrial chain. Chint’s current digital factory and breakthroughs in graphene technology are the continuation of this “crisis – transformation” logic.
III. Seeking Newness and Quality, Injecting the “New Four – Thousand Spirit” into the Traditional Model
After 2014, Wenzhou learned from its past mistakes and launched the “510 Industrial Cultivation and Improvement Project” to promote the integrated development of traditional industries (electrical and footwear) and emerging industries (new energy, laser and optoelectronics). Data shows that in the past three years, the average annual growth rate of Wenzhou’s industrial added value has been 8.1%, the output value growth rate in the new energy field has reached 26.6%, and the total output value of the Yueqing electrical cluster will exceed 300 billion yuan. More notably, the “Four – Thousand Spirit” (traveling thousands of miles, using thousands of methods, saying thousands of words, and enduring thousands of hardships) has been given new connotations: from “running the market” to “building a global R & D network”, from “selling products” to “attacking core technologies”. Chint’s graphene copper cable technology and the transformation of the Internet of Things platform have not only solved the bottleneck problem of “silver contacts” but also driven the digital upgrading of more than 400 suppliers, tripling the per – capita efficiency. This path of “traditional industries + digital empowerment + global layout” provides a replicable sample for the transformation of traditional manufacturing.
Negative Comments: The “Growing Pains” of the Wenzhou Model – The Cost of Transition from Disorder to Rationality
The forty years of the Wenzhou Model is also a history of “trial and error”. From the early days of counterfeiting and shoddy products, capital speculation to the hollowing – out of the real economy, its development has not been smooth, exposing deep – seated problems in the private economy such as imperfect institutions, lagging supervision, and short – sighted capital.
I. Early Disordered Development: Counterfeiting and Shoddy Products Overdraft the Regional Brand Value
In the 1980s and 1990s, the “wild growth” of Wenzhou’s private economy was accompanied by serious quality problems. The shoddy electrical appliances in Liushi led to coal mine explosions, and the “broken belt” incident of Chai Songyue was widely spread across the country. Wenzhou once became a synonym for “counterfeiting and shoddy products”. Behind this was the superposition of multiple factors: the low technical threshold of family workshops, the absence of supervision, and the planned control of key raw materials such as “silver” by policies (enterprises were forced to use “Yuan Datou” or even copper as substitutes), resulting in out – of – control quality. More importantly, the “business cunning” of some Wenzhou merchants evolved into short – sighted profit – seeking. The black humor of Taishun people “faking obituaries to deceive equipment” essentially showed a disregard for the spirit of contract. Although this disordered development brought short – term wealth, it seriously overdrafted the brand value of “Made in Wenzhou”, and it took nearly a decade to restore trust.
II. Capital Speculation: The Double Backlash of the Hollowing – Out of the Real Economy and Financial Risks
In the 2000s, Wenzhou’s capital shifted from the real economy to “speculating in real estate, coal, and cotton”, which was essentially a “vote with feet” against the deterioration of the local industrial environment. On the one hand, the soaring land prices (Wenzhou’s housing prices increased by 2.5 times in three years) and the shortage of talents forced enterprises such as Chint and Delixi to relocate to Shanghai. On the other hand, private capital lacked legal investment channels and turned to high – return speculation. Data shows that Wenzhou people once controlled 60% of small and medium – sized coal mines in Shanxi and 50% of cotton ginning factories in Xinjiang, and the real – estate speculators’ footprints spread across the country. However, this “flight from the real economy to the virtual economy” eventually backfired. In 2011, with the real – estate regulation and the outbreak of the private lending crisis, the collapse of the guarantee chain led to the flight of Hu Fulin, the “King of Glasses”, and the bankruptcy of Zhuangji Group. Many GDP indicators of Wenzhou ranked at the bottom in the province, and the average lifespan of new enterprises was only four years. This lesson warns that if the short – sighted profit – seeking nature of capital is divorced from the support of the real economy, it will eventually trigger systemic risks; if a regional economy loses its industrial “foundation”, the outflow of capital will lead to a vicious cycle of “hollowing – out”.
III. Transformation Challenges: The Dilemma of the Upgrading of Small and Micro Enterprises and the Reconstruction of the Industrial Ecosystem
Although Wenzhou has achieved remarkable results in transformation in recent years, there are still concerns about being “big but not strong”. The 140,000 small and micro enterprises in the city contribute 96% of the industrial output value, but most of them are still at the middle and lower ends of the industrial chain, with low technological content and weak risk – resistance ability. For example, although there are brands like Aokang in Wenzhou’s shoe industry, there is still a significant gap compared with Anta in Quanzhou, which has a scale of 100 billion. Metersbonwe in the clothing industry has shown signs of decline, while Septwolves in Quanzhou has maintained growth through brand rejuvenation. In addition, the relocation of enterprises has taken away technical and management talents, damaging the local industrial ecosystem. The number of professional markets has decreased from three or four hundred to the sixth in the province, the number of listed companies has been surpassed by Taizhou, and there is even the absurd footnote of a “psychiatric hospital becoming a well – known listed enterprise”. This shows that if the cluster advantages of traditional industries are not timely transformed into innovation advantages, they may fall into the “low – end lock – in”; and the upgrading of small and micro enterprises requires systematic support in technology, capital, and talents, and it is difficult to achieve overnight with only policy support.
Suggestions for Entrepreneurs: Insights from the Forty Years of the Wenzhou Model on the “Changes” and “Constants” in Entrepreneurship
The ups and downs of Wenzhou over the past forty years have provided valuable experiences and lessons for entrepreneurs. Based on its development context, the following suggestions are worth considering:
I. Adhere to the Principle of “Real Economy as the Foundation” and Beware of the Traps of Capital Speculation
Wenzhou’s “ten lost years” started when capital deviated from the real economy. Entrepreneurs should be clear that short – term speculation (such as real – estate speculation and resource speculation) may bring quick money, but businesses lacking technological and brand barriers are difficult to sustain. They should focus on their main business and invest resources in product R & D, quality improvement, and brand building. For example, Chint and Delixi were able to seize the opportunity after the anti – counterfeiting campaign and grow into industry leaders because they focused on the electrical industry.
II. Make Good Use of the “Two – way Empowerment” of Policies and the Market
The success of the Wenzhou Model is inseparable from the tolerance of policies towards market vitality (such as the rehabilitation of the “Eight Kings”) and the guidance during crises (such as the targeted support after the anti – counterfeiting campaign). Entrepreneurs should pay attention to policy trends and actively connect with resources such as industrial cultivation projects (such as Wenzhou’s “510 Project”) and scientific and technological innovation subsidies. At the same time, they should respect market laws and avoid relying on policy “blood transfusions”. Instead, they should drive product innovation through market demand.
III. Take Quality and Brand as the “Life – Line” and Avoid Repeating the Mistakes of “Counterfeiting and Shoddy Products”
The price Wenzhou paid for quality problems in the early days (damaged brand and difficult trust reconstruction) warns entrepreneurs that quality must be put first. They can learn from Chint’s experience: improve product competitiveness through digital management (such as monitoring production data through the Internet of Things platform) and core technology breakthroughs (such as using graphene to replace silver contacts); at the same time, pay attention to long – term brand building and accumulate user trust.
IV. Embrace the “New Four – Thousand Spirit” and Shift from “Running the Market” to “Strengthening Innovation”
The traditional “Four – Thousand Spirit” (running the market and relying on physical strength) was the starting point of entrepreneurship, but in today’s era of rapid technological iteration, it needs to be upgraded to the “New Four – Thousand Spirit”: “traveling around the world to find resources” (layout overseas R & D centers and supply chains), “using all means to attack technologies” (focusing on core technology breakthroughs), “speaking professional language to build brands” (conveying value with technical language), and “enduring hardships to improve internal strength” (improving management and digital capabilities). For example, through its global R & D network and graphene technology, Chint has upgraded from an “electrical appliance manufacturer” to a “green energy solution provider”.
V. Build a “Symbiotic” Industrial Chain and Avoid “Going It Alone”
The lessons of Wenzhou show that the relocation of enterprises will damage the local industrial ecosystem. Entrepreneurs should actively cooperate with upstream and downstream enterprises, and improve the overall competitiveness through technology sharing and production capacity coordination. For example, Chint has driven the digital transformation of more than 400 suppliers, which has not only stabilized the supply chain but also improved the overall efficiency of the industrial chain.
Conclusion
The forty years of the Wenzhou Model is a cyclic history of “release of market vitality – disordered trial and error – policy guidance – transformation and rebirth”. Its core inspiration is that the prosperity of the private economy requires respect for the profit – seeking nature of human beings, and more importantly, institutional tolerance and guidance for the market; for entrepreneurs to succeed, they need to maintain the courage to be the first in the world and also adhere to the original intention of “real economy as the foundation”. From the “Eight Kings” to Chint and Delixi, from the “real – estate speculators” to the “new energy locomotive”, the story of Wenzhou continues. It proves that as long as the vitality of the market and the driving force for innovation remain, the future of the private economy will surely “seek newness and quality” and continue its legend.
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