Hard Times for a Wenzhou Clan

By Chen Zhouxi
Published: 2008-11-24

From Nation page 9 issue 394 Nov.17 2008
Original article:

A few days ago, Huang Jinsong received a phone call from his daughter and son-in-law in Mexico City. He was told his leather belts and glasses were no longer profitable there, and that he should close down his factory.

Huang hailed from Wenzhou, Zhejiang province, a place known widely as the cradle of China's private economy. For two decades his Zhejiang factory exported leather goods, glasses and low-voltage devices to Mexico, the US, the Netherlands and other countries.

He is also the vice-president of the Mexican-Chinese Chamber of Commerce. While he runs the manufacturing at home, his daughter and son-in-law manage business on the other side of the Pacific.

But like the times, business was changing. Mexico's economy has dived in the aftermath of the US financial crisis. "Mexicans have no money to buy stuff now," he said, adding that belt sales of his company had declined by over 20% compared to last year, though prices remained virtually the same.

Huang recalled that during the boom, his company took up one third of Mexico's belt market, with annual sales hovering between USD 60 million and USD 80 million, and a profit margin of over 20%.

But as depressed the Mexican market was, it was still much better than the US market, he said.

His elder son and daughter-in-law started a leather belt wholesale store in New York five years ago. In past years, the couple made a net profit of USD 500,000 a year on average, with monthly sales of around USD 200,000.

Recently, however, their daily sales have dropped to a few thousand dollars, and they've projected that this year's profit would decrease to between USD 300,000 and USD 400,000.

"The crisis is changing our marketing strategy," Huang said, adding his elder son had become extremely "prudent" about the American market. Meanwhile, he had cut stocks in certain projects in order to maintain cash flow.

Huang Jinsong was not the only Wenzhou businessman with such trouble. In early November, some 1,000 Wenzhou merchants with business overseas converged at the Second Worldwide Wenzhou Conference in Wenzhou to discuss countermeasures to the worsening global economic climate.

Liao Zili, president of the Wenzhou Chinese Association in New York, said that most Wenzhou businessmen there dealt with retail business, and all of them had seen declining sales, especially in the gift sector, which was down by 50%.

The outlook in the European market is also pessimistic. "Our business has been cut in half," said Zheng Mengwu, vice-president of the Federation of European Wenzhou Chinese (FEWC), referring to both wholesale and retail sales in Spain.

Zheng Xianjie, also a vice-president of the FEWC, said "Many Wenzhou merchants in Italy are planning to move to other industries."

He said Wenzhou businessmen there used to enjoy good returns in Prato, the textile center in central Italy, but this year, they were suffering huge losses.

Worried about a global economic downturn, many oversea Wenzhou merchants were looking for new investment opportunities.

"Christmas is a watershed," said Huang Jinsong, adding he would decide on his future investment strategy after the coming Christmas season.

He planned to visit Vietnam and Cambodia to research forestry and agriculture there before the end of the year. He said he was inspired by his friend Hu Jinlin, the vice president of Chinese Chamber of Commerce in Cambodia who had spent USD 6 million to buy a permit to develop 10,000 hectares of virgin forests in Cambodia.

As for the future, Huang said with a grin, "When the economy is down, you just have to listen and observe more; perhaps you can find new opportunities."