Draft:Wenzhou Model

The formation of the Wenzhou Model must be traced back to the special political and economic environment in the early days of China's reform and opening-up. In 1979, the first batch of then-illegal non-public individual industrial and commercial households appeared in Haimen Town, Huangyan County, Taizhou City, Zhejiang Province. Although regarded as "illegal" at the time, they marked the beginning of the private economy. Since the state had not yet established a mature market economic system, local governments adopted a relatively lenient — even "non-action" — attitude toward economic development, allowing the folk economy in the Wenzhou region to grow rapidly. Wenzhou people relied on small family-workshop-style enterprises, flexible private capital financing, and a natural habit of clustering, gradually forming a "school of fish economy"(Chinese：魚群經濟) dominated by the private sector. In 1985, the term "Wenzhou Model" first appeared in Liberation Daily, marking the official naming and recognition of this development path.^[2]

The Wenzhou Model is often called "school of fish economy" , describing the widespread scene of small enterprises and family workshops across Wenzhou, together with flexible private capital (Wenzhou private capital features highly flexible financing combined with a natural tendency to cluster, forming the advantage of Wenzhou private capital). This differs from the collective economy of the Sunan Model (where products mainly served as supporting components for large-scale industry) and from the Pearl River Model (which emphasized development through foreign capital).

During the process of economic development, the local government long adopted a relatively relaxed management approach, with minimal intervention in private economic activities and even tacit approval in some areas. Some scholars and observers believe this "non-action" state stemmed from the government's lack of experience in managing a market economy in the early reform period; others summarize it as "non-action due to incompetence" , viewing local government as lacking initiative in economic governance. Another perspective argues that, under the political and economic environment of the time, merely allowing private economic activities that deviated from mainstream policy orientation to exist and develop — instead of directly banning or suppressing them — already meant that local governments and their officials bore substantial political risk. Even into the early 1990s, the local government still had to face external criticism and questioning regarding the excessively high proportion of private economy in Wenzhou.^[3]

In recent years, constrained by national policies and the financial crisis, Wenzhou capital has begun to flow out of the mainland, leading to external doubts about the continuing development capacity of the Wenzhou Model.

Compared with another reform and opening-up model — the Sunan Model — the lack of necessary regulation and guidance in the Wenzhou Model also led to rampant counterfeiting and shoddy goods.

For a long period, Wenzhou products were almost synonymous with inferior counterfeits. On August 8, 1987, a public event was held at Wulinmen Square in Hangzhou to burn counterfeit and shoddy shoes from Wenzhou.^[4] This event is considered a humiliation in the history of Wenzhou's economy. It was from this incident onward that Wenzhou goods began moving toward a path that emphasized quality and integrity. As a result of this event, starting in 2002, Wenzhou City designated August 8 as "Wenzhou Integrity Day" . On August 8, 2007, departments including the Wenzhou Credit Office held an event with this theme at Wulin Square in Hangzhou.^[5]

Its extensive development approach caused extremely severe damage to the local natural environment. In a relatively short time, almost all the rivers and waterways in the area became polluted — the well-known tanning pollution in Shuitou, Pingyang being one prominent example. The electroplating industry also caused serious environmental destruction in the region.^[6]

In contrast, the three cities in southern Jiangsu quickly introduced foreign capital and established joint ventures, turning the Sunan region into a production base for high-quality global brand-name products. Numerous multinational corporations settled in southern Jiangsu, and its GDP far surpassed that of regions following the Wenzhou Model. However, this advantage was also closely related to southern Jiangsu's stronger economic foundation and superior transportation and geographical location.