bodyType

customContents

entityId

entityUuid

articlePageQuery

filter

article

articleBaseAdvertisingInfoArticle

articleListArticle

articleSeoArticle

hooksArticleAcknowledgementGateOverlayArticle

hooksTrackPageViewArticle

hooksContentInterestArticle

articleLinkingDataContent

hooksAmpRedirectArticle

articleSchemaContent

liveArticle

advertZone

sentiment

contentLock

topics

types

sections

paywallTypes

createdDate

publishedDate

sponsorType

urlAlias

moreOnThisArticles

commentCount

authorLocations

authors

corrections

displaySlideShow

multimediaEmbed

printHeadline

seriesContainer

articleSpeeches

socialHeadline

headline

images

flag

firstTopic

glossary

flattenTypeIds

image

relatedLinks

relatedNewsletters

__typename

sponsor

pdfFiles

seriesReverseOrder

series

disableOffPlatformContent

published

updatedDate

summary

subHeadline

body

keywords

readingTime

customTimezone

liveContents

SCMP Reporter

Farmers in one county outside Ningbo started 10 years ago to produce the special grass needed to make the tatami mattresses loved by the Japanese. With costs a fraction of those in Japan, they made a fortune and built three-storey homes and bought Mercedes.

 This year, demand for the mattresses has slumped, prices have collapsed and many farmers have been left with heavy debt and no demand.

 About a dozen have committed suicide.

 This is the most dramatic impact of the Asian crisis on Ningbo, a thriving export city in eastern Zhejiang province.

 They are feeling the crisis too in the Economic and Trade Development Zone, a prime location in the city for foreign investment and next to Beilun port, one of the best harbours in the mainland.

 Samsung has built a factory there to make ships and ship components. It started production last year, but the firm has put off a planned second and third phase.

 The Hong Kong subsidiary of US firm Concord Pacific has been slow to bring in promised registered capital of US$334 million for a petrochemical plant, officials said.

 The Japanese boss of a factory making construction materials to withstand earthquakes, with investment of more than $59 million, has disappeared after demand at home collapsed for his product.

 The zone is looking for a new investor for the plant.

 'It is harder to get investors this year,' explained one zone official.

 'In the first nine months, we approved 16 projects with capital of $117 million, up 9.5 per cent on the same period last year, but actual capital fell 40 per cent, also to $117 million.'  'European and American companies have become more cautious about investing. Since last year, we have been targeting Taiwan firms. Their government told them to invest in Southeast Asia and look at the result. Their plants in Indonesia were burnt and ransacked.

 'They have no alternative but to invest in China.'  Exporting to Asia has become harder, and prices have fallen, but exports from the zone rose 17 per cent in the first nine months, to $269 million.

 For the city as a whole, the increase in exports in the first eight months was 12 per cent, to $2.29 billion, while its GDP in the first half of the year rose 14.4 per cent to 93.7 billion yuan.

 Economics professor Lu Jun said: 'These figures may look high but are lower than our performance over the past 15 years. Previously, annual growth of exports was 30-40 per cent and of GDP 17 per cent.'  That is because Ningbo is the biggest industrial city in Zhejiang province, one of the biggest winners in the 20 years of Dengist reform.

 State companies produce just 12 per cent of Ningbo's GDP, Sino-foreign joint ventures 22.5 per cent, collective, township and village firms and joint stock companies with mixed ownership 56.5 per cent and private companies the remaining 9 per cent.

 It is provinces with a high proportion of state industry, like those in the northeast and northwest, that are growing the slowest.

 Ningbo was lucky. Because it contained an important naval base that was seen as a prime target for Chiang Kai-shek's bombers in Taiwan, it received little state investment in the Maoist era.

 The city cursed the central government at that time, but now that policy is seen as a blessing. Ningbo's growth is due to thousands of small and medium-size companies making toys, socks, garments, electronics and electrical machinery, financed by local governments or by the entrepreneurs themselves.

 These firms do not carry the same burden of retired workers, pension and medical benefits and other obligations as state firms.

 When they have no orders, they send the workers home until they have some.

 The city is best known as a maker of men's garments, with 1,800 producers and 12 per cent of national garment output, and home of many of the mainland's best-known domestic brands. Garments account for 30 per cent of the city's GDP.

 Last week, it celebrated this industry with its second international fashion festival, with fashion shows and exhibitions; the 90-minute opening ceremony, a history of clothes-making in Ningbo, was broadcast live on satellite television nationwide.

 Among the exhibitors was Peiluocheng, a firm started by 19 women in a room in a paddy field outside Ningbo in 1985.

 It has grown to have annual sales of more than 135 million yuan (about HK$125.5 million), employing 1,000 people making shirts, suits and uniforms for companies.

 It was founded by Shi Liying, then 41 and a party official in her village.

 Officially, her firm was a 'village enterprise', even though the village government put in no capital. To get the officials out of its hair, the firm has since 1995 paid them four million yuan to turn itself into a private business.

 'They were interfering constantly. It took so long to decide anything, because they had meetings and were too nervous to invest,' Ms Shi said.

 But, though it is now a private company and legally independent of the government, the firm cannot keep the officials away.

 They want money for everything from a signboard to a new road or overdue pensions.

 You can take business out of the government, it seems, but not government out of business.

 'Our little village has 12 leaders, each with a car, a driver and a secretary,' Ms Shi's son, the company general manager, said wearily. 'You cannot change China overnight.' Growth is due to thousands of small and medium-size companies making toys, socks, garments, electronics . . . financed by local governments or by the entrepreneurs themselves 



City of innovators learns pain of capitalism in crisis