Beijing leaders have been watching Wenzhou for the past two years. The city's business chiefs have been visited by Mr Jiang and six of the seven members of the Politburo during that time.

One of the unique factors they noticed about the city was its lack of unemployment. The port city with a population of more than seven million has an unemployment rate of less than one per cent, according to the city's statistics department - compared with a national average estimated at eight per cent.

One of the reasons cited for the low unemployment rate is that there are few state-owned enterprises in the city due to Wenzhou's proximity to Taiwan.

The Government never invested much in what was initially a remote coastal city in Zhejiang province because it was fearful of how close it was to the island.

The lack of government funding and a natural dearth of land has resulted in a business structure rare by mainland standards - 98 per cent of companies in Wenzhou are privately owned.

Any workers made redundant by the limited number of state-owned enterprises in the area are usually absorbed by the robust private sector.

Apart from creating enough jobs for its own residents, the city has attracted about 1.3 million workers - mostly labourers from inland provinces, and some management talent for the well-established enterprises. China's economists like to talk about the Wenzhou model, the epitome of success under China's private economy after the open-door policy of the late 1970s.

The city's entrepreneurial spirit started early in Wenzhou.

In 1957, when the rest of the country was caught in the collective movement at the start of Mao Zedong's Great Leap Forward, more than 1,000 villages in Wenzhou allocated land to individual families - a practice similar to the contract system adopted by late paramount leader Deng Xiaoping 20 years later.

The Wenzhou model - a development pattern based on flourishing family-owned small shops and factories - was first coined in 1985 when academics and central government officials discovered the thriving coastal city. Wenzhou was given a boost when the People's Daily published an editorial in 1986 praising the model as a practical way of developing China's rural areas.

But the momentum slowed between 1989 and 1991 amid criticism that its capitalism had gone too far.

During this period, Wenzhou's economic growth was even lower than the national average.

Analysts say the Wenzhou model has a higher chance of survival this time given the open endorsement from the top. Local government and leading private businessmen have spoken enthusiastically about Mr Jiang's July speech and say it will greatly boost the private sector.

Of the three recognised economic reform and development models in China, the Wenzhou model has become the most resilient and successful.

Wenzhou has maintained a growth rate above 12 per cent for the past 2.5 years while the rest of the country struggles to meet the targeted eight per cent.

Economist Wu Jinglian pronounced Wenzhou and its outlying areas as the most promising and dynamic economy in China.

One of the other two models, centred on the Pearl Delta region, which relies heavily on foreign investment and exports, has slowed down significantly this year.

The Sunan model, based on a collectively owned enterprise format in southern Jiangsu province, was pronounced dead after it was found that nearly all collectively owned enterprises had been sold to private individuals.

'The Wenzhou model is basically the neo-classical model, which says the less the Government interferes, the better the market will perform,' said Andie Xie, chief economist of Morgan Stanley Dean Witter (Asia).

'It is meaningful to the rest of the country in this way,' he said.

But many doubt the Wenzhou model can be repeated elsewhere on the mainland.

One major reason, according to Wu Minyi, Wenzhou's vice-mayor, is its people.

Wenzhou people are known throughout China for their penchant for business and their entrepreneurial spirit.

It is no longer the port city that housed tens of thousands of sweatshops that flooded the country with cheap but poor-quality consumer products.

An example is Zhejiang Wenzhou Zhengtai Group, one of the leading enterprises in Wenzhou.

The electrical switches producer, created 16 years ago with 50,000 yuan (HK$47,000), has transformed itself into one of the largest industrial electrical appliance makers in China, with 1.1 billion assets and a sales revenue of 4.2 billion yuan last year.

Although most enterprises are family owned, many large ones employ managers.

Mr Wu talks about the new Wenzhou model compared with the old one of 'the factory at the front, the home at the back'.

It is illustrated by the example of Meters Bonwe, a manufacturer of casual wear.

The brand, which became one of the '10 most famous clothes brands' in China last year, has more than 5,000 franchise outlets across the country, producing 800,000 sets of casual wear. Yet it has no manufacturing plants of its own and employs only 300 management and design staff in its head office in Wenzhou.

It has contracted out all production to factories in Guangdong and franchised out 75 per cent of the retail operations.

This is no small feat for a city that was once more famous for manufacturing the products itself, but selling them under the label of someone else.

Graphic: WENZ24GFN