More than 200 business owners in Zhejiang, the mainland's cradle of entrepreneurship, fled or went into hiding in the first nine months of this year after their flow of capital dried up, an official report says.
The 228 companies, mostly small and medium-sized enterprises (SMEs), were found to owe about 76 million yuan (HK$93 million) in wages to nearly 15,000 workers, the Oriental Morning Post reported yesterday, citing a report by Zhejiang authorities.
By comparison, the number of workers who failed to get their wages because their bosses fled during the 2008 financial crisis was just 5,000 to 6,000, an unnamed official from the province was quoted as saying.
Zhou Dewen, who chairs the association for SME development in Wenzhou, the province's best-known centre of entrepreneurship, expects the situation will only worsen in coming months.
'Before the Lunar New Year, there will still be many companies suffering from closures or fleeing bosses. The end of the year is usually the prime time for SME owners to hide from paying wages,' he said.
The reasons for so many fleeing bosses, the report said, were a lack of capital because of the tightening up on bank lending, mounting debt owed to private creditors, mismanagement and blind credit guarantees.
'The central bank has raised the required deposit reserve ratio several times. The first reaction of banks was to reduce loans to SMEs. The SMEs then turned to private creditors, but their high interest rates became an unbearable burden, leading them directly to bankruptcy,' the report said.