Welcome to Wenzhou.
It looks like any other mid-sized city, but this is China’s capital of capitalism. The city’s seven million people hold an estimated $100 billion in private capital.
Now in an ambitious pilot scheme, Wenzhou is allowing its residents to pump up to $3 million into any single overseas investment, a breakthrough in China’s tightly controlled capital markets.
Beijing says it hasn’t approved the plan, but people here aren’t likely to let that put them off.
Wenzhou Bureau of Foreign Trade and Economic Cooperation’s Zhou Xiaoping says, “I guess you could say we’re a bit gutsy, a lot of Wenzhounese want to invest overseas, to look for new products, or sales channels or technology. So we will push ahead and see what happens.”
Located on the coast between Shanghai and Hong Kong, Wenzhou produces one in every five pairs of shoes in the world, 60% of the world’s buttons, and 70% of the world’s cigarette lighters.
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Wenzhou has produced some of China’s biggest brands and many of the nation’s wealthiest men.
The tradition of business lives on.
Take Hu Xuchang. Straight out of the university, he started up a factory making large industrial plastic pipes and now has $75 million in sales.
Youli Group Chairman Hu Xuchang says, “Growing up, most of my family was doing business. Very few worked for others. So I always took it for granted that I would also open a factory. I had no ideas of the pros and cons of being a boss, so I just thought I could make a lot of money that way.”
Hu is toying with the idea of buying a winery in France to import to China. Property investment is also on his radar. Xuchang says, “I’ve heard that homes along the Thames River in London are much cheaper than the apartments along the Huangpu River in Shanghai. That’s a pretty tempting deal, right?”
Under the pilot program, Wenzhounese are banned from investing in real estate, securities, or financial companies overseas. But there’s little the government can do to control the funds once they leave China’s shores.
Xiaoping said, “If people want to speculate on property and stocks overseas, they can always find ways to get the money out.”
A large diaspora of Wenzhounese especially in places like France, Italy and Spain make it easy to transfer funds in and out of China through underground markets.
Overseas investment opportunities can also be found through this global network. If Wenzhou’s pilot program takes off, it’s likely to step up the pace of China’s journey towards a new economic future.
Bottom line: Residents of Wenzhou, China’s cradle of capitalism, will be allowed to invest $3 million each overseas, paving the way for a flood of fresh capital on world markets.