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SCMP Reporter

Entrepreneurs see opportunities amid downturn
While pessimism hangs over worldwide markets in the deepening financial crisis and keeps investors at bay, investors and speculators of Wenzhou, owners of 600 billion yuan (HK$681 billion) of wealth in Zhejiang province, are  again on the prowl for bargains.
From property to cotton, coal and stocks, the Wenzhou lot has been present in each investment boom since 2001, helping inflate the price bubbles when the  economy grew robustly.
Come the current downturn and the severest economic slowdown on the mainland in three decades,  the Wenzhou brand of entrepreneurship is still not diminished.
'Funds have been  gathering, ready for bargain hunting in the property market and targeting  golden investment opportunities in industries,' said Zhou Dewen, the chairman of the Wenzhou SME Development Promotion Federation, which has 1,000 small and medium-sized enterprise members.
About 20 per cent of Wenzhou's 300,000 SMEs  had suspended operation or shut down this year,  a victim of the yuan's appreciation against the dollar, rising production costs, loan curbs in the first half and the global financial turmoil.
'The changes in business climate have made Wenzhou businessmen  more cautious. They have been divesting from industries, stocks and property markets since the beginning of the year, holding cash for the winter,' Mr Zhou said.
At the end of August, the outstanding bank deposits of Wenzhou residents totalled 199.43 billion yuan, up 29.06 billion yuan from the beginning of the year, according to the Wenzhou branch of the China Banking Regulatory Commission.
But the State Council's  4 trillion yuan stimulus package  has sent a message of hope to some Wenzhou people.
'They always follow the nation's policies in a timely manner. Now they are acting quickly to dig out opportunities,' Mr Zhou said.
Huang Weijian, Wenzhou Hengshen Asset Management president, said many local businessmen had started, or were planning, to invest in real estate after some developers from Beijing, Shanghai, Tianjin, Chongqing and other cities convinced them the timing was ripe to acquire the discounted assets while also offering additional sweeteners.
'Some developers promised an annual 10 per cent investment return and the buyers can return the property without any restrictions. It is financing in nature,' said Mr Huang.
Chen Zhitong, a Wenzhou manufacturer, said he and his friends regarded an 8 to 12 per cent  return reasonable when they bought residential properties in Hangzhou, Shanghai and Chengdu in the past few months.
Retail properties in major cities were also another favourite among speculators who betted on the  retail sector as Beijing had repeatedly  tried to boost domestic consumption, Mr Chen said.
'Also, my friends went to Urumqi in Xinjiang, Guizhou and other western provinces  to look for copper and iron ore mine projects. News travels  quickly. It seems  people in the town  get to know the latest promising investment target overnight.'
Wenzhou people  struck it rich in the 1980s and 1990s from manufacturing glasses, lighters, leather shoes, valves and hardware at low costs, and then selling them overseas. But profit margins dwindled over the years and by 2001, they were reduced to 5 per cent or less, forcing manufacturers to look for opportunities outside their sector.
In 2001, the first Wenzhou house-buying group, comprising 157 people, arrived in Shanghai. They pooled more than 50 million yuan in cash and bought more than 100 apartments in three days, stunning the country's biggest commercial city.
In the subsequent years, they bought coal mines in Shanxi, cotton fields in Xinjiang, oilfields in the country's west, and speculated on stocks before  cashing out and sending stock prices crashing.
'Wenzhou people don't give up easily. The business climate isn't good this year and many manufacturers are struggling to survive. Some have halted operations, but they are actively seeking chances to make a change - to enter other fields,' said Chen Gaolin, a Yueqing township leather-belt plant owner.
Industry  groups are also playing a role in identifying opportunities and disseminating information.
The SME federation  receives almost daily  officials from other provinces, calling with investment projects.  'I arranged for 40 of our SME members to travel to Yingshang county in Anhui province last month,' Mr Zhou says.
'The county government offered 46 hectares of land at very low prices for us to build an industrial zone. It's a good opportunity for our companies to head inland where land and labour are much cheaper.
'In just 20 days, the companies paid a total of 200 million yuan and acquired the land use rights.'
Mr Zhou said Wenzhou investors had also snapped up aborted property projects or unfinished buildings across the country for investments.
The fortunes that Wenzhou people have built show that the early bird catches the worm. The success has so far come  amid an economic boom  but the bold and swift Wenzhou  entrepreneurial spirit is untested in the current global downturn that is pushing several of the world's biggest economies into recession.
The country itself will struggle to maintain an 8 per cent growth, domestic property prices are likely to drop by up to 30 per cent, and overcapacity is expected to weigh on industries' profitability.
Still, in a display of the Wenzhou  spirit, Mr Zhou is undaunted. 'We believe China's economic growth will still be healthy. We cannot let our money sleep at low interest rates in banks. A lesson we learnt from past experience is that the quicker and more active we are, the more successful we will be.'
Bold and swift
Wenzhou enterprise is untested in the current global downturn
The bank deposits of Wenzhou residents in August totalled, in yuan: yuan199b



Wenzhou investors  in search of bargains