Enterprises weather economic storm with gov't support

Special
Report: Global Financial Crisis

by Zhang Heping

WENZHOU, Zhejiang, May 3 (Xinhua) -- The impact of the U.S.-originated
financial crisis has reached almost every corner of the earth.

Wenzhou, a small coastal city in east China's Zhejiang Province, found its
manufacturing sector the hardest hit. Many companies needed help, especially in
product sales at home or abroad. Since the second half of 2008, the local
government took a variety of measures to support businesses. The efforts seemed
to pay off.

In Wenzhou, more than 99 percent of businesses are small and private firms.
The small size made them vulnerable. In order to help companies increase
domestic sales, the city government initiated a program late last year for
opening up 100 shopping centers in big markets of major cities across the
country. The store was expected to deal in Wenzhou's famous branded products.
Taking advantage of the 170-odd trade associations established by Wenzhou
business people in as many cities, the government sponsored the selection of
products and venue cities, provided subsidies to cover some sales promotion
costs, and check that the dealing is honest.

The first "Wenzhou Famous Brands Shopping Center" was inaugurated on
January 15 at the Maigo Entertainment Plaza in north China's Tianjin. Some 20
varieties of Wenzhou-made products, including shoes and garments branded
Kangnai, Aokang, Hongqingting, Jodoll and Beijixinxiu, enjoyed a fabulous sale
in the initial period. Encouraged by the success, more stores were on the
waiting list for opening in other cities later this year.

"The government program solved the problems that would have frustrated a
company if it fought all alone," Wenzhou Fashion Association president Zheng
Chenai said.

In January the city government handed out a total of 150 million yuan to
facilitate companies to go to international fairs and expositions in groups. It
also put aside a sizable fund to underwrite company's exports. Since the start
of the year, Wenzhou had staged 54 commodity fairs of varied scales and impact,
most of which were sponsored jointly by the government and companies. The number
of events was double that for the same period of 2008. The moves helped boost
sales. Although many orders that companies had accepted were short-termed and
small in volume, which reflected caution at fluctuating exchange rates, many
small amounts combined to a big one.

The Hongqingting Group transacted a total of 1.5 million euros for
supplying leather shoes at the Italian MICAM fair in early March. It was the
first time the company attended this super shoe trade event. CHINT, a leading
manufacturer of electrical apparatus such as power transmission and distribution
equipment, reported an exports growth of 34.86 percent to 3.46 million U.S.
dollars in the same month, thanks to its tactics of supplying cost efficient
alternative products, and exploring new markets such as the Middle East, Africa,
Latin America and Russia.

While the national exports reported negative growths in the first three
months, the figures for Wenzhou remained positive. The city's exports in March
climbed 17.9 percent year on year. Sales of its competitive products like
spectacles and lighters went up 53.5 percent and 52.3 percent. And the export of
shoes, garments and synthetic leather also registered 20 percent or higher
growths. Declines in exports to the European Union and Russia were made up by
sales to new destinations like the ASEAN countries. Wenzhou's first quarter
exports totaled 2.181 billion U.S. dollars, up 14 percent on a year before.

The government encouraged its officials to approach businesses and have
close contact with entrepreneurs. At the same time government staffers were
warned to guard against corruption. The year 2009 was designated a "Company
Service Year", when an expressed focus of the government work was to promote
"government-corporate coordinated operations to overcome economic difficulties."

A package of 52 major industrial projects, totaling 30 billion yuan in
investment, was on Wenzhou government's plan for this year. The work was
distributed among officials, who took clear responsibility for the coordination,
supervision and progression of each project.

Companies in Wenzhou were encouraged by the government to achieve
competitiveness through mergers, or by improving product mix and upgrading
technologies. As a result, the city's many makers of synthetic leather, used for
making shoes, garments or carpets, joined forces to form four group companies.
Other companies like General Protecht Group, an export-oriented supplier of
special electrical products such as GFCI (Ground Fault Circuit Interrupter),
extended business undertakings to the upper part of the LED supply chain, with a
projected annual output of 720 million yuan. Huazheng Plastics made inroads into
the sector of Li-ion cells and electric motorbikes. And Zhejiang Universe
Filter, a subsidiary of Hsoar Group, obtained production licenses from Chrysler
and GM to deliver filters to the two U.S. companies as a Tier 1 Supplier.

Huayi Electrical Apparatus Group, a rapidly growing player of wind energy,
delivered its first 1.5 MW wind turbine in July 2008.The product promised a 170
percent growth for the company in output value this year. Huayi was encouraged
and supported by the government, which had planned to build up the region into
the country's third largest wind equipment manufacturing base. In the annual
Government Work Report released in February, the city also expressed the wish to
become an important manufacturing base for solar energy.

In the second half of 2008 the city government resolved to build a coastal
industrial belt by claiming land from the sea. The move was considered a
solution to the scarcity of land available for further development. According to
the plan, the offshore area will yield 8000 mu (about 533 hectares) of low land
this year for developing industries. Around 30 enterprises had expressed
intention of entering. Their business lines included electrical appliances and
solar energy equipment.

Economic indices for the first three months showed signs of recovery. Total
retail sales of consumer goods climbed 14.2 percent on the same period of 2008.
Sales of motor vehicles, as indicated by applications for license plates, went
up nearly 30 percent. Comparing with the last quarter of 2008, trading on new
and used housing surged 214 percent and 128 percent. In January-March period,
the financial sector reported a 31.3 percent year-on-year growth in balance of
deposits and 31.2 percent in balance of lending. The industrial use of
electricity rose 77.2 percent in March, against that of February. The use of
electricity by manufacturing enterprises increased 33 percent. The city's total
industrial output still reported a negative growth in the first quarter. But the
rate of decrease was falling.

A survey conducted by the government's Development and Reform Commission --
of 100 enterprises averaging a yearly output of 600 million yuan -- found 77
percent of the companies had orders equaling those of a year before or more, 65
percent made the same amounts of profits or more, and 80 percent had the same
numbers of employees or more.

Nearly 88 percent of the respondents said operations in the coming quarter
would be as usual or better. And 65 percent expressed the intention of investing
in the following six months.

"Difficulty is never distributed evenly," the city's Party chief Shao
Zhanwei said April 18 at a media event, "On the whole, the global market is
going down. But it is still enormous (and full of opportunities) to a specific
company. If you dare to try it and have confidence, you'll rake in more orders
than the other guy."

"The current crisis might not have reached its bottom yet. But the
enterprising private businesses here believe they can get out of it as early as
possible," Shao said.