The eastern Chinese city of Wenzhou produces more cigarette lighters and spectacles than anywhere on earth, and has long been seen as an economic trend-setter for the entire country. So reports that dozens of factory owners in the city have absconded in recent weeks, leaving workers unpaid and mountains of debt, are seen by some as an ominous sign for the national economy.
Slowing global demand for cheap Chinese exports, rising production costs and unsustainable levels of debt have combined to crush some of the country’s most savvy entrepreneurs. In one tragic case, the owner of a Wenzhou shoe factory who owed more than Rmb400m ($63m) committed suicide three weeks ago. More than 90 other bosses have run away, according to state media.
Trade fluctuations in China, the world’s leading exporter, are often seen as indicators of the health of the global economy – and for some bearish investors, Wenzhou’s problems are a sign that a hard landing is imminent for the nation. This is a dire prospect for the global economy at a time when most of the developed world is facing the likelihood of renewed recession.