Rising money woes driving factory owners out of business and into flight

WENZHOU, Zhejiang - A fugitive Wenzhou eyeglass manufacturer returned to his hometown on Monday to assist the local government in the restructuring of his business.

His return is widely seen as an indication that the Wenzhou city authorities are stepping up their involvement in containing the credit crisis that has already driven many manufacturers out of business and led their owners to flee abroad, or, in some extreme cases, commit suicide.

Hu Fulin, the founder of Zhejiang Center Group Co Ltd, one of China's biggest spectacle makers, fled on Sept 20 after the collapse of his underground money lending operation. Zhejiang Center, with 3,000 workers, produces more than 20 million pairs of glasses a year.

The company apparently has remained a growing concern while Hu's other ventures in real estate speculation and loan shark operations failed.

Media reports have said he owes up to 2 billion yuan ($313 million), including 1.2 billion yuan in high-interest debt from underground banks, and that he originally fled to the United States. It is not clear what convinced him to come back to help in the government-initiated restructuring of Zhejiang Center.

Media reports have also said that he was the third such fugitive from debt to return to China.

According to the latest local government statistics, more than 90 business owners have fled the city because they were unable to repay their debts. A shoe producer, Shen Kuizheng, committed suicide by leaping from the window of his 22nd floor apartment.

"The return of Hu is a good sign that the financial problems among medium-sized enterprises could be solved sooner if more enterprise owners were willing to cooperate with the local government instead of running away," said Zhou Dewen, the chairman of the Wenzhou Small and Medium-sized Enterprise Development Association.

A special joint task force was set up on Sept 29 by 14 local government departments to regulate private lending, help small firms cope with serious cash flow problems and rebuild their companies.

In an attempt to ease the escalating crisis, local authorities have tried to persuade fugitive business owners to return and restructure their companies with certain assistance.

"The team led by the financial office is in charge of helping and guiding enterprises in difficulties with how to balance their production and cash flow problems, as well as help failed companies to restructure," said Ye Xinming, deputy director of the city government's financial office.

The visit of Premier Wen Jiabao to Shaoxing and Wenzhou on Oct 3 and 4 indicated that the central government had realized the importance of providing more financial support to small and medium-sized enterprises.

"Premier Wen promised that the amount of loans for small and medium-sized companies would definitely be increased, and more steps would be taken soon to help those enterprises out of their difficulties," said Zhou, who accompanied Wen and other officials during the visit to Wenzhou.

After Wen's visit, media reports mentioned a rumor that the local government had applied through the provincial government to the central bank for a loan of 60 billion yuan to help local banks increase financing to struggling local enterprises. The Wenzhou government hasn't confirmed that rumor.