Forty Years of the Wenzhou Model

In July 2006, the smell of gunpowder filled the air at the end of the Mediterranean Sea. It was the second day of the July War.

The Israeli Defense Forces bombed Beirut International Airport and the southern regions of Lebanon, resulting in 27 deaths.

At the same time when the war broke out, several Wenzhou businessmen left Tel Aviv International Airport in Israel and headed back to Shanghai.

They were invited by Guttman, the Consul - General of Israel in Shanghai, to explore business opportunities in Israel, but unexpectedly got caught up in this war.

Among these businessmen was Wang Junhao, the youngest of the three founding brothers of Junyao Group. In 1991, the three brothers invested to contract an air route from Changsha to Wenzhou. This was the first time private capital entered the domestic aviation industry, which was regarded as "extremely bold" at that time.

The Israelis in the war had a touch of romanticism. An Israeli air - force officer rushed to bomb Lebanon in the morning so that he could go home and take a walk with his wife by the sea in the evening.

This subtle sense of relaxation made the Wenzhou businessmen not feel the urgency of the war. In Tel Aviv, a female soldier took turns taking photos with them.

"No one does a losing business, but some people dare to take risks even in a life - threatening business." The war was nothing to the Wenzhou people.

Back then in Iraq, right after the Associated Press announced the end of the war, dozens of Wenzhou people emerged from the ruins of Baghdad and discussed with the surviving Iraqis how to rebuild new oil wells.

Going through all hardships and traveling far and wide is the character of the Wenzhou people, shaped by their geographical environment.

Wenzhou faces the East China Sea and is surrounded by mountains on three sides. There is scarce arable land and frequent typhoons. With no land to farm, the Wenzhou people had to run small workshops at home. They worked long hours every day to refine their products and then sold their goods all over the world on foot.

In 1985, the Liberation Daily summarized this as the "Wenzhou Model". Cadres left their official positions in the office and went to lead the locals to set up factories; the locals put aside their shyness at home and went out to do business.

Source: WeChat public account "Zheli from China News Service"

In the following 40 years, the Wenzhou people replicated and promoted the "Wenzhou Model" across the country and even around the world, creating numerous "Wenzhou Streets" and "Wenzhou Cities".

To this day, the Wenzhou Model still retains its vitality.

The Eight Kings and the Emerging Private Economy in Wenzhou

In 1982, in Liushi Town, Yueqing County, Wenzhou, a major arrest operation was in the making.

Liu Dayuan, the "Screw King", got up early one morning and found slogans such as "Severely crack down on serious criminal activities in the economic field" and "Leniency for confession, severity for resistance!" posted on the streets.

There were plain - clothes policemen trailing behind him.

Businessmen usually have a sharp sense of smell. Liu Dayuan immediately decided to flee. He slipped into an alley when no one was looking, went home to get tens of thousands of yuan in cash, and then jumped into a small wooden boat by the river.

Liu Dayuan fled in a sorry state, wearing only a vest and shorts.

Liu Dayuan was among the first batch of businessmen in Wenzhou. After graduating from high school in 1969, he didn't want to work in a state - owned factory and preferred to do business.

At that time, the family workshops in Liushi Town mainly produced small electrical appliances such as circuit breakers, relays, travel switches, and AC contactors. Liu Dayuan dealt in the screws used for these small electrical appliances.

It can be said that Liu Dayuan was to the low - voltage small electrical appliances in Wenzhou back then what Huang Renxun is to ChatGPT today.

At that time, the state - owned standard parts factory in Shanghai only had more than 20,000 types of screws, while Liu Dayuan's shop had as many as 40,000 types, earning it the title of the "Screw Museum".

There was a market rumor that Liu Dayuan put the state - owned standard parts factory in Shanghai out of business.

Liu Dayuan, who got rich by selling screws, installed a telephone at home in 1977. His phone number was only three digits: 282.

At that time, the town government was still using manual telephones, which often didn't work. When there was an urgent matter, people had to call Lao Liu.

Liu Dayuan was quite overbearing with the phone. Cadres had to make an appointment with him one day in advance if they wanted to use it. He would allow it if he was in a good mood, and deny it if not.

In 1980, Liu Dayuan bought the first motorcycle in Liushi and roared through the streets.

It was an era of "letting some people get rich first". After the truth was liberated, the "Oriental Jews" woke up overnight. Family workshops with the "front - shop, back - factory" and "hanging - account operation" models began to emerge. Everyone in Liushi was a "king".

Besides Liu Dayuan, there were also Hu Jinlin, the "Hardware King"; Ye Jianhua, the "Catalogue King"; Cheng Buqing, the "Miner's Lamp King"; Wu Shilian, the "Casting King"; Chen Yinsong, the "Bakelite King"; Zheng Xiangqing, the "Coil King"; and Wang Maiqian, the "Second - hand Goods King".

The businesses of the "Eight Kings" mainly involved simple manual labor to produce various industrial products, except for Ye Jianhua, the "Catalogue King".

He used to run a photo studio. After the small electrical appliances in Liushi became popular, he took pictures of these small electrical appliances with a camera, marked the product names, specifications, and models on the photos, and finally compiled an "Electrical Product Catalog". He made it available for the salesmen who left Wenzhou to sell goods, making it convenient for customers to view the products.

Ye Jianhua's business was a bit ahead of its time. By the time he was arrested, he had only earned more than 40,000 yuan.

Twenty years later, a short - statured man from Hangzhou re - created Ye Jianhua's catalog on the Internet, and a company aiming to last for 102 years was born. Ye Jianhua is also affectionately called the "Grandpa of Alibaba" by the locals.

While Ye Jianhua was still doing small - scale business, the businesses of the other "kings" were gradually growing. Liu Dayuan installed a telephone and bought a motorcycle at home, and the others were no less successful.

For example, when the Yueqing Tax Bureau checked Hu Jinlin's accounts, they found that he had more than 1.2 million yuan in his account, with his output value equivalent to that of several communes and brigades.

A senior cadre, holding the account book, talked to Hu Jinlin: "I've been through the 25,000 - li Long March, and my monthly salary is only 381 yuan. You, a young man, earn hundreds of thousands of yuan a year! Aren't you undermining our socialist system?"

"How did you get so rich?" As soon as this was said, Hu Jinlin knew that the "Eight Kings" were in danger. You set up factories, built Western - style buildings, rode motorcycles, and used telephones, but was your factory "capitalist or socialist"?

There were signs of trouble in Liushi Town. In 1982, the sword finally fell.

In January and April 1982, the State Council issued two documents, requiring a crackdown on economic crimes and severe punishment for speculation and profiteering. A "severe crackdown on criminal activities in the economic field" was carried out across the country.

The capable people in the market economy were arrested on the charge of "speculation and profiteering". The "Eight Kings of Liushi" were the first to be targeted.

Six of them were arrested and imprisoned. Only Liu Dayuan and Hu Jinlin managed to escape. Wang Maiqian, who received the heaviest sentence, was imprisoned for 7 years.

After the "Eight Kings", the self - employed in Liushi either fled or were arrested. The industrial development in Yueqing was severely hit.

To rectify the private economy in Wenzhou, Yuan Fanglie, a Shandong native good at "cutting off the capitalist tail", came to Wenzhou as the Secretary of the Wenzhou Municipal Party Committee a year earlier with a "military order" in one hand and a "special imperial edict" in the other. The arrest of the "Eight Kings" happened in the early days of Yuan Fanglie's tenure.

After arresting the "Eight Kings", Yuan Fanglie realized that something was wrong. Cracking down on speculation and profiteering didn't seem to save the Wenzhou economy.

One - third of the state - owned factories in Wenzhou went bankrupt that year. Yuan Fanglie tried to support these factories by finding funds and projects for them, but there was no improvement. However, an old woman could earn 6,000 yuan a year by weaving elastic bands with five homemade machines, which was more than what he, the Secretary of the Municipal Party Committee, earned.

New terms such as "specialized households", "family workshops", "joint - household enterprises", "salesmen", "hanging - account operation", and "private money - lending houses" from the mouths of the Wenzhou people left Yuan Fanglie confused.

Yuan Fanglie also thought during his research that these things had appeared in Wenzhou more than once, but each time they were "cut off" by people like him.

It was precisely these scattered, small - scale, and sometimes even "illegal" things that had tenacious vitality and supported the Wenzhou economy.

With the state - owned economy struggling and the private economy booming, Yuan Fanglie shifted his stance and supported the private economy.

However, the private economy in Wenzhou had been severely damaged by the previous campaigns. The "kings" had either fled or been arrested, and the confidence in the private economy had hit rock - bottom.

Yuan Fanglie called a meeting for representatives of key households and specialized households, but no one dared to come. Some representatives even packed their bags and fled overnight.

The "Eight Kings" were still in prison. Was Yuan Fanglie's meeting a "Hongmen Banquet" (a trap)?

The people showed Yuan Fanglie the way with their actions. To restore the confidence of the Wenzhou people to "travel far and wide", the first step was to release the "Eight Kings" and rehabilitate them.

The reform policy came at the right time. In 1984, the third "No. 1 Document" of the Central Committee pointed out that it was necessary to dredge the circulation channels and develop commercial production. Taking advantage of this opportunity, Yuan Fanglie, then a member of the Standing Committee of the Zhejiang Provincial Party Committee and the Secretary of the Wenzhou Municipal Party Committee, proposed at a teleconference of the Standing Committee of the Provincial Party Committee to rehabilitate the "Eight Kings", which was unanimously approved.

In the spring of 1984, at a meeting of cadres at or above the township - level in the whole city, the Wenzhou Municipal Party Committee publicly announced the complete rehabilitation of the "Eight Kings".

The "Eight Kings" were cleared of their false charges, which restored the business confidence of the Wenzhou people. The family handicrafts in Wenzhou "boomed" again, leading the development of China's private economy.

In 1985, the Liberation Daily published a report titled "330,000 People in Wenzhou Are Engaged in Family Industries", officially proposing the "Wenzhou Model". Its main feature was production on a family - based scale, with professional farmer - salesmen purchasing raw materials from all over the country.

The Wenzhou people "traveled far and wide, exhausted all means, said all they could, and endured all hardships" to sell their products across the country.

The "boom" of the private business in Wenzhou attracted the sociologist Fei Xiaotong. He made a conclusive summary of the "Wenzhou Model", saying that Wenzhou's economic development was a "small - commodity, large - market" model driven by commerce.

The connotation of these six words has been infinitely extended in the past forty years.

A Counterfeiting Crackdown Gave Rise to Two Fortune 500 Companies

The rehabilitation of the "Eight Kings" led to the explosion of the "Wenzhou Model".

Yuan Fanglie was thus called the "midwife" of the "Wenzhou Model". When he left Wenzhou in 1985, the economic aggregate and fiscal revenue had doubled.

Under Yuan Fanglie's leadership, the people of Wenzhou mobilized and each contributed 3 yuan to establish Wenzhou University, making up for the shortage of local higher education.

By the end of 1986, among the population of about 6 million in Wenzhou at that time, 1.2 million people had shifted from traditional agriculture to industry and commerce. The number of family workshops had soared to 146,500, with more than 470 specialized markets. 100,000 farmer - salesmen were active across the country.

Wenzhou entered its first "golden age" after the reform and opening - up.

As their business grew, the Wenzhou people got complacent, and their commercial cunning began to surface.

In Taishun, Wenzhou, the local villagers deceived a large number of second - hand equipment from state - owned factories across the country. Once the equipment was delivered, the farmers published obituaries in the newspapers, claiming that the person who received the equipment had died. The state - owned factories couldn't collect debts from a black - and - white photo, so they had to accept the loss.

This somewhat black - humorous trick was played by the Taishun people for several years, and a second - hand equipment market was formed locally.

The commercial order began to collapse, and it was no surprise that there were more counterfeit and shoddy products.

In August 1989, Chai Songyue, then the Deputy Governor of Zhejiang Province, went on a business trip to Beijing with two female deputy governors from the Department of Finance and the Department of Transportation.

It was sweltering in Beijing in August, and the air - conditioning in the hotel was on full blast.

Just as they started talking, Chai Songyue, who was a bit cold, sneezed, and his belt broke.

This belt was bought by Chai Songyue two months ago during a business trip to Wenzhou for 5 yuan. The deputy secretary of the Wenzhou Party Committee accompanied him to the famous Cangnan Market to choose it. The stall owner also assured him that it was real cowhide.

Why did the new belt break?

Chai Songyue took out the belt and found that there was a layer of cardboard inside, wrapped in rags, glued together, and then pressed with plastic. It just looked like real leather.

Later, the story was distorted. When it reached Comrade Zhu, the sneeze became a fart.

Chai Songyue broke his belt when he farted, and this story spread across the country.

There seemed to be no quality - qualified products in Wenzhou at that time, such as shoddy leather shoes, belts, glasses, and electrical appliances.

Liushi, known for its small electrical appliances, became the epicenter of the storm again.

At that time, the reform and opening - up was going deeper. All regions were striving for development, afraid of missing the wave of reform. A large number of small electrical appliances from Liushi were purchased for production.

However, the quality of the electrical appliances produced in Liushi was getting worse. Counterfeit electrical appliances often leaked electricity, and accidents occurred frequently. It even led to a gas explosion in a coal mine, causing multiple casualties. In May 1990, the General Office of the State Council issued a special document to Liushi, and a working group of more than 200 people, jointly organized by seven ministries and commissions, was sent in.

The counterfeiting crackdown lasted for more than five months. All 1,267 low - voltage electrical appliance stores in the town were closed, 1,544 family workshops suspended business, and 359 second - hand business licenses were revoked.