Wenzhou Fastener Industry Urgently Needs "Pharmaceuticals" for Policy Transformation

Abstract: According to statistics, there are more than 400,000 business entities in Wenzhou, but there are only 18 large-scale enterprises, 599 medium-sized enterprises, and the rest are all small and micro enterprises. Some low-slack traditional industries have become increasingly weak under the current macro-control and market environment. Jiang Huilong, executive deputy secretary-general of the Wenzhou Fastener Industry Association, said that the Wenzhou fastener industry once lost 1,000 companies within one year, mainly because raw material prices have been rising all the way, making it impossible for small businesses to bear the weight of rising costs.

The Wenzhou private lending crisis since 2011 has once again made Wenzhou the focus of attention in the country. On February 5, the Yabuli Forum for the first time since the establishment of the Forum in 12 years has included a city as a topic for the conference. The theme of the forum is “Why does Wenzhou?”.

What happened to Wenzhou? Less than a decade ago, the industries of Wenzhou and Wenzhou were also known as the natural insulators of the securities market and virtual economy. China’s Honest Chairman Guan Jingru recalled that while working at the National Economic Reform Commission, “Wenzhou people do not fry stocks”. Now, “How can we borrow from usury?”

A year ago, a business owner introduced that his factory had more than 1,000 employees. However, his hard work for a year was less than one million. His wife invested 10 houses in Shanghai and earned more than 30 million in 8 years. The opening of a thousand-man factory was less than one-third that of his wife’s real estate speculation. Many demonstration results similar to “exemplies” have enabled capital to make the most correct and most rational economic choices - withdrawing funds that have been invested in entities and switching to more profitable areas, earning profits from real estate speculation with money, and later it has evolved into “chaos with money”. money".

“The problem of the private lending crisis lies in the financial sector. The root cause is in the real economy.” Deputy deputy governor and party secretary Chen Derong said at the Wenzhou Business Meeting.

Huang Fajing, president of the Wenzhou Lighter Industry Association, said sadly that the industry has grown from 4,000 companies in its most glorious period to dozens today. The average profit of the industry from 30% to the current industry profit is only 3% to 5%. An entrepreneur uses “thinner than a blade” to describe the profits of an entity.

Even more frightening is that the drawbacks of this industrial structure have consumed land indicators too quickly. Chen Derong said on many occasions that Wenzhou has become the "incubator" for start-up companies. Wenzhou has thus been characterized by semi-urbanization. “A good place is like Europe, but a large number of areas are stretches of towns and cities, which is similar to Africa.” The low and fragmented industrial structure, in turn, leads to a poor local environment and insufficient high-end elements, creating a vicious circle.

The industrialization of the financial system suffered crisis and naturally spread to banks. As of the end of 2011, the non-performing loan ratio of the banking industry in Wenzhou City was 1.36 percent, an increase of 267% from August 2011 and an increase of 0.92 percentage points from the beginning of 2011. The increase was the highest in history, and it was also the rate of non-performing loans in the banking industry of our city. The first "rebound" in 10 years.

However, people are paying more attention to the profits of banks. According to data from the Wenzhou Banking Supervision Branch, in the first half of 2011, a total of 1,330 banking financial institutions in the city realized a total of 12.349 billion yuan in book profits in both local and foreign currencies, an increase of 4.157 billion yuan or 50.8% year-on-year.

“In many fields, we cannot get in, we can only choose the most easily accessible real estate,” said the relevant personage of the Zhongliang Real Estate Group at a recent forum. Another boss who has both an industry and a small loan company made it clear that in 2011, the latter’s profits were significantly higher than the former.

On the one hand, the state-owned monopoly financial system sieges the city, making it difficult for private capital to enter the highly profitable financial industry. On the other hand, the industry encountered difficulties in financing. Wenzhou enterprises had to turn to the private sector. According to Ma Jinlong, an economist in Wenzhou, 70% of Wenzhou enterprises rely on their own funds and private financing, and even some companies have reached 80%.

Chen Derong appealed at the Yabuli Forum: Wenzhou private lending should not be demonized. He said: “Without Wenzhou’s private finance, there would be no Wenzhou’s market economy, and no Wenzhou entrepreneurs... If we put it against the market economy and we’re against the entrepreneurial spirit and demonize it, I think that Wenzhou is unfair."

The problem does not only come from private lending. When the reporter visited Su Fangzhong, a private entrepreneur who was the earliest in the financial industry in Wenzhou, he said: “The fundamental reason for this crisis is the financial system. Banks should not have such a large profit as a service industry. As a service industry, banks It should not compete with the real industry for profit. If the bank still competes with the people for profit, SMEs will die within three years of dying for five years."

Shao Qixing, chairman of Wenzhou Conch Group Co., Ltd., also believes that the root cause of Wenzhou's dilemma can be summarized as follows: The source is imperfect in the financial system; it is trapped in the downturn of the stock market and the property market; and small and medium-sized enterprises die in short loans.

Guo Bing’s president of the Wenzhou Guarantee Association was worried that by the end of the first quarter, it was the peak period of loan repayments for Wenzhou enterprises. According to the statistics of the People's Bank of China, by the end of March, the loan repayment quota for SMEs was about 100 billion yuan.

The "medicine" of government transformation

The outside world believes that the government's “doing nothing” has created the Wenzhou model in the early days of the market economy. However, in the face of the lack of public services and the poor development environment, Wenzhou has launched a series of reforms since 2011. The intention is very obvious: to make the absence of government functions in place.

"The government's letting go in the market economy does not work and it cannot be deduced from other fields." "The government and the market have a border. If the government does nothing in the area where you do it yourself, it is the absence. It is dereliction of duty. From the three-level cadre conference, to the mobilization of government agencies reform conference, to the Wenzhou World Business Conference, Chen Derong repeatedly elaborated on the concept of a limited government and promising government.

Poor development environment and insufficient investment. Wenzhou launched an unprecedented make up class in 2011. In the past, the city illegally built nearly 9 million square meters of the entire year, which was the highest in the calendar year; greening, and adding 408.5 hectares of green land to the city this winter and this spring, which is equivalent to the sum of the past 6 years; investment, Wenzhou 2011 total investment of 175.2 billion Yuan, investment rate 52.3%......

The government's practice of strengthening public services has caused widespread praise. China National Institute of Venture Capital Chen Gongmeng said: “The government has increased efforts to improve the hard environment of the city, especially the basic public facilities such as roads, transportation, and construction, and we have seen great changes in our hometown.” Wenzhou Wanshang Huiquan Electronics Ye Lianying, Chairman of Digital Co., Ltd., said: “In the past year, every time I come back, I feel that the city’s image has changed significantly. Before I went back to the city from the airport, I’ve seen dirty spots along the way, but now I’m replaced by greenery and the environment is improving. It shows precisely the government's service awareness and governance commitment."

In the aspect of public policy innovation, Wenzhou's development plan for the local financial industry in 2011 and its eight subprojects for supporting innovation are high hopes. This “1+8” financial reform and innovation program is intended to fundamentally resolve local issues. Debt crisis has found its way for private and private enterprises.

At present, the overall plan for the comprehensive financial reform pilot zone in Wenzhou has been consulted by seven ministries and commissions, and will be submitted to the State Council for approval procedures after being signed. The contents of the plan involve allowing qualified legal persons to act as sponsors of village and town banks; setting up appropriate non-bank financial institutions such as trust and investment companies; carrying out pilot projects for individual foreign direct investment; and supporting banks to implement tilting policies for small and micro enterprises. Professionals believe that the construction of a national financial reform pilot zone will play a role that cannot be underestimated for the leap-forward development of Wenzhou in the future. Zhu Gejun, deputy director of the Wenzhou Municipal Party School’s Department of Economics, said that this may be an opportunity for the transformation and upgrading of the Wenzhou model. In his opinion, the effect of the reform plan will surely shake the country like the “Amazon butterfly”.

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