Case Studies, China: Individual Firms and Entrepreneurs
Agribusiness firms also face rising labor costs. Huatong employs nearly 1,200 people. In 2010, the average monthly salary for a frontline worker was about Y 2,000 ($295); monthly salaries of management staff ranged from Y 5,000 ($739) to Y 10,000 ($1,477). Wage costs in Zhejiang’s food processing industry approximately doubled during 2005–10 and continued to rise thereafter. The Role of Government The government helped the Huatong Group succeed in several, mostly indirect ways. Zhu’s business benefited from a local administration that offered entrepreneurs incentives such as low-priced land in industrial parks, subsidized interest on loans, and tax breaks. The local rural credit cooperative loan was a great help to Zhu in the start-up years. The local authorities also supplied training in agricultural best practices to the farmers who supply pigs and poultry to Zhu’s processing plants. To boost agribusiness in rural areas, the government offers subsidies to local farmers who agree to dedicate their land to supplying agribusiness. This enables scattered lots to be joined into units better suited for large-scale production of hogs and other agroproducts. As the leading agribusiness enterprise in Yiwu City, Huatong has received Y 359 million ($53 million) in bank loans from the Agricultural Development Bank, sometimes at the concessional interest rates offered to designated suppliers of China’s national stockpile of pork reserves. In a broader sense, Huatong’s success has also benefited from national policies that encourage commercial relations with Taiwan, China, as well as with other industrially advanced economies. The resulting ties have fostered the kind of mentoring and innovation that foreign investment can bring. Zhu credits China’s economic reforms with his success. “Huatong is a fruit growing under the nourishment of China’s reform and opening-up,’’ he says. Summary Huatong demonstrates the possibilities that have become available for expansion among innovative, forward-looking entrepreneurs since China’s economic reforms. Zhu started with a rural home-based microbusiness and built it into a massive agribusiness enterprise.
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