Credit Crisis in China's City of Entrepreneurs

Wenzhou is known for making shoes, buttons, eyeglasses, electric switches, water valves and 70% of the world's cigarette lighters. But its most famous product is entrepreneurs. Hemmed in by mountains and with little arable land, this city on China's southeastern coast has relied on trade for centuries. Even in the Maoist era, when capitalism came under sustained and violent attack, private enterprise was never entirely extinguished there. So after China began market reforms in the late 1970s, Wenzhou flourished. "The Wenzhou Model" of small, low-cost manufacturing operations was widely copied in China. Wenzhou now has some 140,000 companies, and its businessfolk have invested across the country in everything from real estate to mining. The city is the locus and symbol of private enterprise in China.

But in recent weeks, the reputation of Wenzhou's entrepreneurs has taken a serious hit.