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When news of one fleeing boss after another broke, the current situation of Wenzhou's real industry became a national focus - why has this been so concentrated recently? Why Wenzhou? A series of question marks were raised over this place, which was previously known for "property speculation" and "garlic speculation".
Funds
From abundance to depletion in less than two years
The boss of the "glasses king" Xinte Group, Hu Fulin, the chairman of OMI Fluid Equipment Co., Ltd., Sun Fucai, the boss of Longwan Xinnaibao Shoes Industry, Tang Feng Shoes boss Huang Baihe, the boss of Xingji Shoes Industry in Jinzhu Industrial Zone, the boss of Europa Standard Parts Co., Ltd., the chairman of Baokang Stainless Steel Products Co., Ltd., Wu Baozhong, the boss of Fuyan Brothers Industry Co., Ltd... The list of Wenzhou bosses who have fled or gone missing continues to grow.
A close look reveals that these bosses share a common characteristic - they are all industrialists.
"Wenzhou is originally the 'headquarters' of private enterprises, with a relatively large number of private entrepreneurs. Every year, there are enterprises that go through the cycle of birth, aging, illness, and death," a seasoned entrepreneur revealed: "However, the direct reason for the collective 'fleeing' is simply - lack of money." After the Mid-Autumn Festival this year, Zhou Dewen, president of the Wenzhou Small and Medium Enterprises Promotion Association, investigated 11 companies, among which eight indicated tightening of capital turnover.
From the beginning of abundant funds in 2009 to the rupture of the capital chain in the second half of 2011, the good times lasted for less than two years - a Wenzhou industrialist privately disclosed: "In 2009, during the post-financial crisis period, local governments had money, banks had money, entrepreneurs had money, and ordinary people also had money. It felt like there was a lot of money, so entrepreneurs began to increase their investments." He mentioned that he was also "enticed" by the "abundance of funds" at that time - "There were two choices then, one was to upgrade and expand the original industry, and the other was to transition to emerging industries."
Hu Fulin, the "glasses king," was very "unfortunate" when he decisively invested 6 billion yuan in the solar photovoltaic industry in 2008. "Hu Fulin was also misled by some information," an insider familiar with Hu Fulin said, "Solar photovoltaics are indeed an emerging industry, but the initial investment is large, easily affected by international factors, and these were things he did not consider at the beginning, especially during the time when bank funds were abundant in 2008 and 2009, he always thought borrowing was easy." When the "front line" had already been laid out, the price of polysilicon dropped by half within a year, leaving Hu Fulin with no choice but to flee.
Profit
Industry average profit margin is only 3%
"The current predicament of Wenzhou's small and medium-sized enterprises is very different from the difficulties during the 2008 financial crisis," Zhou Dewen analyzed and pointed out, "The 2008 financial crisis caused many small and medium-sized enterprises to lose business orders, forcing them to shut down or even go bankrupt. However, this time around, despite having orders, the enterprises dare not accept them, nor do they want to."
The Wenzhou Municipal Economic and Trade Bureau conducted a survey of 855 enterprises, showing that in labor-intensive industries such as footwear, clothing, glasses, lighters, pens, and locks, about 25% of enterprises dared not accept orders due to a shortage of workers. The survey showed that in the first quarter of this year, the sales volume of 35 export-oriented enterprises decreased by 7% compared to the same period last year, profits fell by about 30%, and the loss ratio reached one-fourth. One-third of the enterprises maintained profit growth, with an average profit margin of 3% in these industries, and fewer than ten enterprises had profits exceeding 5%.
Wenzhou Oriental Light Industry Co., Ltd. is a leading enterprise in Wenzhou's lighter industry, with more than 500 employees and annual exports worth millions of US dollars. Chairman Li Zhongjian once told Zhou Dewen that the company's annual profit was less than what his son made from a small cake shop: "Nowadays, the settlement cycle for orders is 3-6 months, not only is the exchange rate risk high, but we can't afford to wait for the capital turnover. Since the beginning of the year, we have abandoned multiple orders worth tens of millions, even hundreds of millions of yuan."
"Most Wenzhou private enterprises have developed in labor-intensive industries such as lighters, leather shoes, and glasses. Affected by the financial crisis, the profits in these industries have become increasingly low," an unnamed insider admitted, "So, everyone was indeed considering whether to transform or upgrade in the past few years."
Not transforming, the industry profit is too low; transforming, the cross-industry situation may not be controllable. This difficult problem faced the Wenzhou industrialists. During our interviews in Wenzhou, we found that most enterprises that stood firm in this storm were those focused on their own profitable industries and only underwent upgrades and reforms; enterprises where the boss fled mostly failed in transformation.
Zhou Dewen indicated that the pressure on outward-oriented small and medium-sized enterprises is greater, with profits falling from 8%-12% during the financial crisis period to 1%-3% now, "The loss of profit space caused by the appreciation of the RMB is one of the main reasons."
Human Resources
Workers demanding wage increases
"Our human resource cost increase exceeds 15%," Yu Wenpin revealed to the reporter, "This is within my acceptable range." Starting from May, Yu Wenpin prepared to implement a "wage collective negotiation system," "In simple terms, it means we negotiate face-to-face with employees about how much their wages should be." It is understood that currently, there are no templates available for reference nationwide for wage collective negotiations, "We are feeling our way forward."
At the same time, during our interview with Xinte Group, employees of the group stated that "salaries are increased once a year," "The company raises salaries every year, with general laborers earning 2,700 yuan per month under a 26-day, 10-hour work schedule, and in June, those who performed well received an additional 200 yuan." Taking the example of an employee at Xinte Group earning more than 3,000 yuan, a single salary increase in June would cost Hu Fulin more than 600,000 yuan in cash.
"Many private enterprises in Wenzhou are mainly labor-intensive, and the rise in human resource costs definitely has an impact on enterprises," a certain entrepreneur admitted, "If the enterprise can develop healthily, then this rise is within a tolerable range. If the capital turnover is already difficult, then this is one of the straws that breaks the camel's back." We learned that after Hu Fulin "fled," the government paid more than 9 million yuan in September wages on his behalf.
"This year, the trend of wage increases has become more intense, the era of labor dividends has passed, workers are demanding wage increases, and enterprises are actively giving wage increases to employees," Zhou Dewen revealed.