A difficult but necessary beginning to recovery

Despite financial reforms, small firms in Wenzhou are still struggling with a shortage of capital, reports Yu Ran from Wenzhou, Zhejiang province

Editor's Note: Wenzhou is marking the first anniversary of landmark financial reforms that are not only of great importance to this center of private enterprise but also to the many other cities and regions that are poised to restructure their own capital markets. Much has been done and much more is expected as the program enters its crucial second year. China Daily is running a series of stories to review these changes:

One year ago, Wenzhou embarked on an ambitious venture of financial reform amid great fanfare.

It was an occasion of significance because it promised to reshape this entrepreneurial hotspot by providing capital for the development of high-value-added sectors to replace struggling low-cost, labor-intensive manufacturing industries, funded largely by an underground money market that had collapsed due to mounting defaults.

Over the past 12 months, the local government has moved quickly to establish the necessary facilities for lenders and borrowers to do business in an environment where transactions are documented and registered. But so far, neither lenders nor borrowers have warmed to the idea of reform.

This is going to change.

The government has initiated the process of passing laws that are expected to give much-needed legal support to the reform program.

In addition, it is poised to step up its efforts to enhance the benefits of reform in terms of fairness and transparency. Government officials interviewed for this story said they are confident that this twin-track approach will fundamentally change the way of doing financial business in Wenzhou.