Economic growth and prosperity is very much of a regional phenomena in China. Regional interests and power bases are strong. Leaders in the wealthy coastal areas routinely ignore orders from Beijing. There are a number of trade barriers that restrict trade between the provinces. There are other bureaucratic obstacles


The greatest economic growth has taken place around coastal cities such as Shanghai, Hong Kong, Shenzhen and Dalian. The coastal region stretching from North Korea to Vietnam has grown rich so quickly it is sometimes referred to as the Gold Coast. By some estimates 90 percent of the foreign investment that has arrived in China since 1980 has ended up in China's coast provinces.

Many party officials in China now believe the SEZ's have out lived their purpose and should have to play by the same rules as everywhere else. Many companies now find Shenzhen to be too expensive and have moved their factories elsewhere in China where they can pay workers $60 a month instead of $200 a month.

Beijing also wants the labor-intensive industries to move inland while the coast regions attract more high tech enterprises.

Websites and Resources

Good Websites and Sources on Economics in China: Chinese Government Regional Economic Reports China Economic Information Network ; Regional Economic Information ; Wikipedia article on the Economy of China Wikipedia ; Asian Development Bank ; World Bank China ; International Monetary Fund (IMF) on China ; China Economic Information Office ; ; U.S. Commerce Department’s Office of China Economic Area (OCEA) ; Statistics: China’s National Bureau of Statistics ; Chinability Blog ; Nationmaster ; Money Chinese Coinage Website ; Chinese Money in the 20th Century ; Chinese Banknotes

Economic News The Economist on China ; China Economic Net ; China Economic Review ; Far East Economic Review ; Economic and Business News Related to China ; China Daily Coverage of Economic Issues ; Financial Times China ; China Perspective ; China Economics Blog ; Economic Policy: OECD Economic Survey of China, 2005 PDF file ; Book: Frontiers of Economics in China, A Collection of Papers ; McKeever Institute’s Economoc Policy Analysis ; Council of Foreign Relations


Free Trade Zones in China

See Economic History

Business Incentives and Free Trade Zones in China

See Economic History

Shenzhen Economy

When Deng launched the reform and open-door policy 30 years ago, he also approved the establishment of a special economic zone (SEZ) in Shenzhen, then a tiny village. With its “special” status, Shenzhen was able to sidestep existing laws and regulations meant to safeguard the socialist command economy and explore ways to develop a capitalist-style market economy. The city's success would later be promoted nationwide, and Shenzhen is seen today as an economic miracle that played a large role in China's development. [Source: Sun Wukong, Asia Times, July 31, 2008]

But in recent years, Shenzhen has been concerned that it is increasingly less “special” now that the rest of China has become as open and market-oriented as the SEZ. With the launch of the political reforms in 2008, however, Shenzhen can once again play a pivotal role in political and social change. [Ibid]

See Places

Pearl River Industrial Area

Pearl River Delta (northwest of Hong Kong) embraces the industrial towns of Guangzhou, Shenzhen, Huizhou, Dongguan, Foshan, Jiangmen, Zhongshan and Zhuia. The region has a population of around 120 million, made up of permanent residents and a "floating population" of migrant laborers. If Hong Kong and Macau are included the Pearl River Area were an independent country it would be East Asia's forth largest economy and its second largest exporter. The Pearl Delta area exports as much as Mexico or South Korea.

China’s first Special Economic Zones (SEZ) opened here in Shenzhen and Zhuhai — as well as in Shantou in Guangdong and Xiamen (Amoy) in Fujian Province — in 1979. In the beginning factories here did most of the manufacturing once performed in Hong Kong. In the early 2000s, the Pearl River Industrial Area drew an astonishing $2 billion of foreign investment a month and accounted for one third of China's exports. Investors and companies are still attracted by cheap labor, good managers and easy access to the outside world. Labor-intensive, export-oriented industries include makers of toys, shoes, Christmas decorations, small gifts and textiles. More advanced factories assemble computer keyboards, televisions, watches motorcycles, and dishwashers. IBM, Samsung, Honda and Wal-Mart are among the companies tat have a major stake here,

Special Economic Zones in Guangdong Province, the Hong Kong area and the Pearl River Delta is sometimes referred to as the “world's factory." As of 2006, there were more than 200,000 factories here. At that time the factories in and around Shenzhen, Dongguan Guangzhou and the Pearl River Delta annually churned out $36 billion worth of goods, nearly a third of all the goods that are exported abroad. They produced 40 percent of the playthings sold in the U.S., including Barbies, Ninja Turtles and Mickey Mouse.

There area now embraces Nansha Port Area in the Port of Guangzhou and large container ports in Shenzhen at Guangzhou. There were plans for a tunnel linking Shenzhen and Zhuhui. But in the end it was decided to build 32-kilometer Shenzhen–Zhongshan Bridge connecting those two major cities and expected to be completed in 2024. As the Pearl River itself: in Guangzhou (Canton) it is such a thick dark soup it looks like one could walk across it.

20080313-shenzhen cnto.jpg

Pearl River Industrial Area and Hong Kong

Nearly all of the factories around Shenzhen and Guangzhou are dependent on Hong Kong for shipped-in raw materials and ships to transport the finished goods abroad.

In 2000, $154 billion worth of goods traveled between Hong Kong and the mainland. Since the Deng reforms in 1978, Hong Kong has moved much of manufacturing capacity in the Pearl River Delta, home to some 80,000 Hong Kong-related enterprises that employ 3 million people. A large share of the goods shipped out of Hong Kong are re-exports, goods that are made in different parts of China, trucked into Hong Kong and then shipped out of Hong Kong harbor.

Most of the Hong Kong investors in the Guangzhou area have family roots in the region and speak the local tongue (Cantonese) as their first language.

In many ways Hong Kong is being transformed into another southern business center. Comparing Shenzhen with Hong Kong, one Chinese businessman told National Geographic, "Shenzhen will catch up economically. These two are like one reservoir, and the border is a dam between them. The water on the other side is high, and here it is shallow. Once we break the dam---the border---the water will be the same level on both sides.

SMEs and the Guangdong Economy

Guangdong is China's richest province interms of gross domestic product (GDP). Its economic success of has been in part due to the mushrooming of small- and medium-sized enterprises (SMEs) in the past 30 years. Most of the SMEs are Hong Kong- and Taiwan-invested labor-intensive, export-oriented manufacturers on the Pearl River Delta. [Source: Asia Times, Wu Zhong, November 26, 2008]

In the past couple of years, the business environment in the Pearl River Delta has become increasingly difficult for SMEs, due to the steady appreciation of the Chinese currency; a sharp increase of production and labor costs; government policy orientations in favor of environmental protection and safeguarding labor interests; and scandals involving the safety and quality of Chinese-made products. Thousands of the SMEs in the region had gone out of business, even before China began to feel the pinch of the global financial crisis. [Ibid]

Wang Yang, who was elected as a politburo member October 2007 and appointed as Guangdong party chief in 2008, called the labor-intensive SMEs. “backward” and said it was time to say goodbye to them. “What are these enterprises which have gone under? Are any of them large enterprises with a big name? No! My judgment is that, generally speaking, these bankrupt enterprises belong to a backward productive force, which is bound to be eliminated by the market.” [Ibid]

Wang has pushed an economic policy for Guangdong that includes plans to move the low-tech, labor-intensive manufacturing industries in the Pearl River Delta to relatively poorer western and northern Guangdong or even out of the province. By doing this, the delta could concentrate on high value-added, high-tech and services industries. In Wang's own words, this is “to empty the bird cage for new birds to settle down”. He and others feel the policy is necessary if Guangdong's development is to be sustainable and the wealth gap among different areas of the province is to be narrowed. [Ibid]

There are problems with the policy. It has been estimated that up to 20 million migrant workers are in Guangdong, most of whom work in the Pearl River Delta. Many of them will surely lose their jobs if Guangdong lets “backward” enterprises die. Having worked in cities for a long time, most of the rural workers will have no land to farm when they return to their home villages. If not well taken care of, they could pose a threat to social stability. [Ibid]

Shanghai's Booming Economy

See Places

Yangtze River Area

See Places

20080313-shanghai pudong cnto.jpg
Pudong in Shanghai

Shanghai Versus Hong Kong and Southern China

Hong Kong is an international center whereas Shanghai is primarily a financial center for China. Among Hong Kong's advantages are abundant capital, strong banks, good courts, low business tax rates, and business practices that conform with international standards.

Shanghai's advantages are its expanding market, cheap labor and central location. Large companies such as Coca-Cola moved their Chinese headquarters from Hong Kong to Shanghai.

Development is being promoted in Shanghai at the expense of Shenzhen, Guangdong and other booming areas in southern China. Guangdong is expected to dominate the consumer electronics and desktop computers, while Shanghai is expected to dominate the semiconductors and notebook computers,


Zhejiang is one of China’s richest provinces. The people there have long been known for their entrepreneurship. Because it surrounded by mountains it has traditionally been neglected by the central government. The coastal areas in particular were neglected because the government thought they might be attacked so why waste money on them This left the people of Zhejiang with little choice but to take care of themselves and become self-reliant, which they did this by pooling money in their families and community organizations known as a meng and starting businesses.

About 80 percent of all Zhejiang entrepreneurs have eight years or less of formal education. Many of their enterprises are financed through the regions famed informal network of private lending that allows them to bypass state-owned financial institutions. Much of the money is borrowed from friends, relatives and business associates at higher interest rates than those charged by banks. Many deals are sealed with only a handshake yet defaults are rare.

Some link the entrepreneurial inclination so the Zhejiang people to high number of Christians that live there and the development of a work ethic not unlike the Protestant work ethic in the United States. See Religion.

See Places


Wenzhou, a coastal city in Zhejiang about 250 miles south of Shanghai and not far from Taiwan, is ground zero for Zhejiang entrepreneurship. In 2006, 130,000 private businesses earned 96 percent of the city output revenue and paid 70 percent of its taxes. By contrast state-owned enterprises generated only 3 percent of Wenzhou’s industrial output, compared to a national average of 10 percent. Most of the companies in Wenzhou are family-owned and were started without government help. The city has been so successful that the “Wenzhou model” is now held up as the model for which other cities are expected to emulate.

Elaine Kurtenbach of Associated Press wrote: Though Wenzhou, a city of about 9 million on China's southeastern coast, accounts for less than 1 percent of the country's economic output, it has an outsized impact on China's manufacturing and its financial markets. Almost all Wenzhou's business is privately owned, much of it by the city's more than 400,000 small and medium-size enterprises. The city's tycoons hold an estimated 800 billion yuan ($126 billion) in private capital and are renowned for driving speculation in property, coal mining and other commodities.

Mercedes, Cadillac and Toyota dealerships line the roads---attesting to the personal wealth that has left the city's nighttime sidewalks chockablock with parked cars and its streets choking with smog. Vast chunks of the city are walled off for construction of luxury apartment complexes such as Noble Peninsula and Platinum Garden, while modern amenities such as a subway line are lacking. [Source: Elaine Kurtenbach, Associated Press, October 18, 2011]

Wenzhou is produces light industry goods such as textiles, shoes and sundry goods. It is the lighter capital of the world. There are more than 500 companies making lighters, accounting for 80 percent of China’s metal lighter production. Ninety percent of them are exported, mainly to European countries. Wenzhou is also home to 4,000 shoemakers that account for one forth “of China’s shoe production.

The average income of Wenzhou is $3,000 (2007), almost double the national average. Buildings are going up at a rapid pace, with gated communities for the wealthy opening up in the suburbs. One worker at a shoe factory told Smithsonian magazine: “Wenzhouese work harder than anyone else in China.” Many of the wealthiest people are Christians. Many have left Wenzhou metropolitan area. By one estimate 2 million people have left to seek their fortune outside of Wenzhou. About half million of them can be found in 70 different foreign countries, including 100,000 in the United States, mostly in New York.

Wenzhou People

People from Wenzhou are famous throughout China for their business and money-making skills. Books about them include The Jews of the East: The Commercial Stories of Fifty Wenshou Businessmen; You Don’t Understand the Wenzhou People; and The Feared Wenzhou People, the Collected Stories of How the Wenzhou People Make Money.

Wenzhou people are often mocked by other Chinese for their flashy ways and strange dialect. They are admired and disliked for their entrepreneurship. Many of the wealthiest Wenzhouese are Christians.

With little arable land and mountains blocking them from the interior of the mainland, the people of Wenzhou have traditionally looked to the sea, trading and opportunities abroad to improve themselves. They promoted the idea that the government should support commercial enterprises during the Song Dynasty in the 12th century and developed a strong trading culture during the Ming period in the 17th century and managed to emerge as an economic powerhouse in recent years without the education levels of Beijing, the special treatment of Shenzhen and the foreign investment of Shanghai.

Wenzhou people have succeeded through hard work, starting out with small businesses and workshops and expanding them. Over time they have come to dominate certain low-tech industries. Zhong Pengrong, a prominent economist told the Los Angeles Times, “Wherever there are business opportunities there are Wenzhou people...Unlike many other people in China who become rich overnight almost all the Wenzhou people built up their wealth from nothing and amassed their fortune through years of hardship.”

Two million Wenzhouese live abroad. The are big in the restaurant business in France, Russia, Italy and Brazil and involved in outsourcing Chinese manufacturing work to Vietnam and North Korea. Wenzhou people can be found everywhere: shipping 10,000 VCRs a month and mining iron and gold in Mongolia; mining molybdenum in North Korea; buying cow leather in Tanzania; and trading shrimp and turbot in Iceland. One Wenzhou man in Inner Mongolia who has four brothers and sisters in Italy told the Los Angeles Times, “My parents told us, “Go out and explore. The farther you reach, the stronger you get.”

Wenzhou Wealth

Wenzhou makes half the world’s cheap shoes, nearly all of its plastic leather, bra part and zippers, and numerous other essential parts to everyday items. Sales of Audis, BMWs and even Maseratis Porsches and Bentleys are brisk in Wenzhou as are the sales of vanity licence plates for outrageous prices. To really impress your friends you need to buy an executive jet or $50,000 Vertu delux mobile phone. Tens of thousands of bottles of Margaux and Chateaux Lafit have been give as gifts and mixed with green tea and sugar before being gulped down.

It s not surprising that housing prices in Wenzhou are among the highest in China. Buying property is a pastime with real estate investments sought not in new apartment building in Wenzhou but also residential blocks in Paris. Wenzhou has a new airport and an opera houses designed by the famous Uruguayan architect Carlos Ott.

Malls in Wenzhou are stacked with band name luxury goods. Furniture stores sell knocks off of items displayed in the Louvre. The new $128 million Shangri-La hotel was built mainly to host extravagant weddings for pampered children who in some cases have been educated at some of Britain’s most famous boarding schools.

In one survey Wenzhou millionaires were asked what they would do if they were forced to chose between their business and their family---60 percent chose their business, 20 percent chose their family and 20 percent couldn’t decide. Wenzhou business people tend to be very superstitious, laying out their factories in accordance with feng shui and starting business on auspicious days.

Wenzhouese have made bids for fashion company Pierre Cardin and tried to buy Michael Jackson’s Neverland Ranch and bring it to Wenzhou.

Debt Panic in Wenzhou

In October 2011, AP reported, “Wenzhou's private entrepreneurs, scrappy survivors in an economy ruled by state industries, once thrived on a formula of cheap backstreet loans and low-cost manufacturing. Now, they're at the center of what some have dubbed China's own subprime debt crisis, a festering mess of borrowings gone sour that has become one of the weakest links in the economy---at a time when strength here is most needed to offset weakness in the U.S. and Europe. [Source: Elaine Kurtenbach, Associated Press, October 18, 2011]

"Do anything, but not manufacturing in China!" exclaimed Yang Guanghua, boss of a Wenzhou electroplating factory. Unable to collect from customers who themselves have no money, Yang said he stopped paying salaries two months ago. "I can't get raw materials because suppliers are afraid I will run away," Yang said. "It's just impossible to get loans from the bank unless you have connections," he said.

Wenzhou's factory bosses are caught in a dire credit crunch. Pyramids of high-interest private lending are collapsing as companies whose profits are dwindling due to rising costs and weakening demand default on their debts. Dozens of tycoons have skipped town. The government has intervened, but many worry the stopgap measures will not prevent the problems from getting worse.

The true scale of informal lending nationwide, much of it derived from bank loans originally intended for other purposes, is unknown. But such lending has ballooned because the reluctance of China's state-run banks to lend to small and medium-sized businesses has been compounded by government curbs on credit to cool inflation. Interest charged by private lenders can be as high as 90 percent, inviting comparisons with dodgy investment schemes.

"I have to conclude that this business is now a Ponzi game, relying on new money to pay off the old money," said Andy Xie, a Shanghai-based economist who traveled the Wenzhou region over the past two months researching the situation. "If not checked, this could lead to a national calamity."

Much of the estimated 500 billion yuan ($79 billion) in private borrowing in Wenzhou went not to manufacturing, but instead to potentially higher return investments in property or commodities---or to still more lending by the borrowers themselves. "When banks cut off lending, businessmen went to the high-interest informal lenders, figuring that a month or two later they'd get loans again to repay their other debts. But the banks are not lending so they ran out of cash," said Yu Jingliang, owner of Zhejiang Pacific Paper Co., which deals in disposable moist towelettes and toilet seat covers.

What might in normal times have been a brief liquidity squeeze became a death grip, as banks ordered to keep record levels of funds in reserves to fight inflation withheld even routine loans. Some of the tycoons that skipped town, including Hu Fulin, owner of major eyeglass maker Zhejiang Center Group, were convinced or coerced into coming back. A few committed suicide.

Effects and Causes of the Wezshou Debt Panic

Reporting from Wenzhou, Keith B. Richburg wrote in the Washington Post, “A half-dozen Mercedes-Benzes, an equal number of BMWs, several Porsches, a Range Rover, a Rolls-Royce and a Hummer, most just a few years old and in pristine condition, were there on a recent day. Their owners were all Wenzhou factory bosses who needed to sell their luxury cars for cash to pay back their business loans. “It’s because of the credit crisis,” said Ma Jianrui, who runs one of the used-car shops and has seen his business booming. “They need money quickly.” [Source: Keith B. Richburg, Washington Post , October 27 2011]

Wenzhou’s debt crisis is complex but essentially boils down to this: The small and medium-size factories that drive the local economy found it increasingly hard to get bank loans this year as the government announced it was ending its stimulus spending and tightening the money supply to rein in inflation. The factories turned to the murky private lending market---small, licensed credit companies, unlicensed underwriters, bigger businesses with spare cash to lend, and loan sharks.

Some of the loans were to pay salaries and keep the factories humming. But much of the money went into more speculative ventures, such as investing in real estate or expanding into newer, riskier businesses with the lure of higher returns. And some individuals and businesses that could get scarce bank loans turned around and loaned the money out again, to friends and neighbors, at higher interest rates.

But the continued economic slowdown in the United States and Europe meant orders dried up for Wenzhou’s hundreds of thousands of small factories. Inflation has been increasing---currently about 6 percent in China---which is one reason the government decided to tighten liquidity. Wages have been rising. The Chinese currency, the renminbi, has been gradually gaining in value against the U.S. dollar, further hammering these export-dependent factories.

With the loans coming due, many cannot pay. Some 90 factories have gone out of business here, and in many cases the bosses simply fled town, said Zhou Dewen, chairman of the Wenzhou association representing small and medium-size businesses. The boss of a shoe manufacturing company, deep in debt, committed suicide by jumping off the roof of his factory. Several of the small credit companies have closed, and the owners have disappeared. Among them are the Jin Qiao Credit Guarantee, which was locked and empty during a recent visit, and the Jin Hong Credit Guarantee, the two firms run by a mother and her daughter. The mother is said to have fled to Finland and the daughter to Brazil.

Wenzhou Debt Crisis as a Warning

Keith B. Richburg wrote in the Washington Post, Many economists fear that the crisis not only could devastate Wenzhou but also may be a portent of what China could be facing on a vastly larger scale: a massive amount of accumulated debt that could rival the subprime crisis in the United States that triggered a larger recession. Most is private debt amassed by small and medium-size companies, economists said, but a portion is personal household debt. Any precise figures are largely guesswork, they said. [Source: Keith B. Richburg, Washington Post , October 27 2011]

Some are comparing the problem of Wenzhou to the collapse of Bear Stearns in March 2008, which was a prelude to the larger financial collapse the following September. Guo Tianyong, an economics professor at Beijing’s Central University of Finance and Economics, called Wenzhou “a signal that high-interest private lending might trigger a debt crisis.”

There are already warning signs that the debt problem is spreading, specifically to parts of Jiangsu and Shanxi provinces, and to Inner Mongolia, where many owners of small mines are believed to be overextended. The privately held debt comes on top of official debt by local government “investment arms” that floated municipal bonds and took out huge bank loans during the stimulus period of 2009 and 2010 to build housing units, airports, highways and subways. Total local government debt in China has been estimated at anywhere between 10 trillion and 14 trillion renminbi (about $1.6 trillion to $2.2 trillion).

Response to Debt Panic in Wenzhou

Elaine Kurtenbach of Associated Press wrote: With the problems spreading to other regions, including the Gobi desert boomtown of Ordos, China's leaders stepped in, ordering banks to lend more and to relax repayment terms for small and medium-sized enterprises. Loan sharks and other informal lenders were reminded not to use violence or other drastic measures to collect debts.Meanwhile, the government is slashing taxes and promising faster processing for export tax rebates.The emergency measures, and a morale boosting visit by Premier Wen Jiabao and other top economic leaders, appear to have eased the recent panic. [Source: Elaine Kurtenbach, Associated Press, October 18, 2011]

But more needs to be done, said Chen Shishang, founder of Senken Group, a maker of police vehicles, warning lights, sirens and riot gear. "From the surface, it looks like the situation is somewhat under control. The government policies are coming and the banks are beginning to adjust, but many companies are still in crisis," Chen said in an interview in his office, an elegant haven of beige marble, oil paintings and ceramics at the company's headquarters in a grimy industrial zone in southern Wenzhou.

"We really need for the government to carry through with its help. We need more support measures," Chen said. "It's like a natural disaster. If everyone comes to help it won't be so dangerous." Zhou Dewen, head of Wenzhou's association for small businesses, estimates up to 40 percent of the country's small and medium-sized manufacturers may have to close or at least cut back production in coming months due to a lack of working capital.

Keith B. Richburg wrote in the Washington Post, The situation in Wenzhou is so urgent that during China’s October National Day holiday, Premier Wen Jiabao traveled here with the finance minister and the governor of the central bank. One result of their trip was the establishment of a provincial bailout fund of up to 100 billion renminbi (about $15.7 billion), according to the Chinese media. “It’s like with General Motors. If the government didn’t save them, GM would have gone bankrupt,” said Wu Jianmin, or “Jimmy,” who runs Lidong Optics, a Wenzhou company making eyeglasses and sunglasses for Wal-Mart, Target, J.C. Penney and others.

Many economists and independent analysts believe that if the central government in Beijing ends up absorbing all of the debt floating around---from private companies and overextended localities, along with the central government’s own debt---China’s real debt-to-GDP ratio could end up being 60 percent or higher. The bigger concern for the government is unrest. When factories close and bosses flee town, workers cannot collect their salaries. It is a scene that officials do not want repeated across the country.


Fujians have traditionally been among the most ambitious go-getters form China. Many of the Chinese that made their fortune in the Hong Kong, United States and Southeast Asia were from Fujian Province (See History and Minorities).

Enterprising Fujians are still breaking new ground, in Africa and other places. One Fujian native, Yang Jie, arrived in Lilongwe, Malawi in the mid 1990s. By the mid 2000s he owned and operated the largest ice cream company in Malawi.

Regions Left Out of the Economic Boom

See Economic History

Spreading the Economic Boom Inland

See Economic History

Image Sources: CNTO

Text Sources: New York Times, Washington Post, Los Angeles Times, Times of London, National Geographic, The New Yorker, Time, Newsweek, Reuters, AP, Lonely Planet Guides, Compton’s Encyclopedia and various books and other publications.

Last updated May 2020

This site contains copyrighted material the use of which has not always been authorized by the copyright owner. Such material is made available in an effort to advance understanding of country or topic discussed in the article. This constitutes 'fair use' of any such copyrighted material as provided for in section 107 of the US Copyright Law. In accordance with Title 17 U.S.C. Section 107, the material on this site is distributed without profit. If you wish to use copyrighted material from this site for purposes of your own that go beyond 'fair use', you must obtain permission from the copyright owner. If you are the copyright owner and would like this content removed from, please contact me.