The formal paper to accompany the previously uploaded presentation.

1. Suzhou vs. Wenzhou:
China’s Growth Will Be Determined by Enterprise
By Meaghan Barbin
China rises. January 14, 2009, the National Board of Statistics reported that China’s economy grew by
13 percent in 2007, an increase from the projected 11.9 percent. Because of this increase, the Chinese
economy finished the year at a value of $3.5 trillion, subsequently overtaking Germany as the third
largest economy in the world. Now, China only trails the United States and Japan.
Economic growth in China is overshadowed only by the projected economic contraction of 2008 and
2009, making growth in the immediate future disappointing in comparison to China’s historical growth.
In the third quarter of 2008, China reported only 9 percent economic growth.
The global financial crisis is sure to have a significant impact on China’s export-driven economy. Though
exportation has grown China’s economy into the giant it is today, many Chinese people do not consider
exportation a sustainable plan for growth. The pending global crisis suggests that this is the perfect
opportunity to restructure the economy, relying less on foreign investment and exports, which are sure
to dry up in lieu of the credit crunch. Instead, China’s economic strategy should encourage more
consumption domestically and the expansion of China’s service industry. Development of China’s
domestic economy is considered essential to reducing the disparity between the urban people and
those inhabiting rural areas, where poverty is still widespread.
The biggest challenge that China faces heading into this global downturn is the lack of enterprise and
capital for individual businesses. Industrial reforms that opened China up to foreign investment in the
1980s created a business model in which Chinese people produced goods financed with foreign capital.
The Suzhou model, commonly refers to the business plan that makes use of foreign direct investment,
because it was heavily adopted in the small city about an hour and a half west of Shanghai. The Suzhou
model created very little enterprise in China and did not encourage entrepreneurship in the Chinese
people. Today, Suzhou is synonymous with poverty and pollution.
Five hours south of Suzhou lies the city of Wenzhou, the other business model in China. Wenzhou, “the
country’s biggest manufacturer of small scale goods.” developed its business model largely independent
of government-run businesses in China. In Wenzhou, many locals did not seek foreign direct
investment. Instead, they saved individually to start their own businesses, serving customers both
domestically and abroad. As these businesses grew, Wenzhou and its population of entrepreneurs
became a success story in China, as the private sector now makes up 95 percent of business in
Wenzhou. However, few have been quick to adopt the Wenzhou model, as returns are slower and
foreign direct investment has been easy, says a source familiar with the issue.
In China, a common saying is, “India is the world’s office. China is the world’s factory.” With a pending
economic contraction, China must seek ways to diversify its economy beyond manufacturing for foreign
interests. Focus on short-term gains comes at a high cost: a lack of innovation, dirty rivers, and
corruption. In order for China’s economy to continue to exceed that of developed nations, Chinese
businesses must emphasize the importance of human capital and free enterprise.

2. Works Cited
“China Becomes World’s Third Largest Economy”
http://www.france24.com/en/20090114-china-becomes-world-third-largest-economy-overtakes-
germany-growth
“Wenzhou lights the way for China”
http://news.bbc.co.uk/2/hi/business/4328341.stm
“Suzhou’s SIP a model for development”
http://www.suzhou-expat.com/Suzhou-Business/suzhous-sip-a-model-for-development.html
“Foreign Investment Rings Hollow in Suzhou”
http://english.caijing.com.cn/2008-11-14/110028559.html
“Debating decentralized development: a reconsideration of the Wenzhou and Kerala models
http://findarticles.com/p/articles/mi_m1TSD/is_2006_Sept/ai_n25012661
“Wenzhou charts new survival strategies to beat slump”
http://www.china.org.cn/business/news/2009-02/17/content_17289003.htm