In the early 1990s, a group of people from Zhouning in Ningde began to venture into the steel trading business in Shanghai. This movement gradually evolved into one of the most influential groups in the steel trade industry, known as the "One Belt, One Road" network. As the economy expanded, banks started to provide more support to this sector. By 2001, the steel trade entered a phase of rapid growth, with many traders from Zhouning and surrounding areas entering the market.
The demand for capital was high, and some banks even offered interest rates as high as 20%, which seemed astonishing at the time. However, this helped steel traders grow their businesses significantly. As a result, banks became more willing to lend money, and during peak times, interest rates soared up to 40%. This period was seen as a golden era for steel traders, with one prominent figure, Zhu Junhong, famously saying, “This is an era when pigs can fly.†The idea was that if you had the courage to invest, you could make big profits.
From 2001 to 2010, the steel industry experienced a “45-degree†growth in production. During this time, the average profit per ton of steel reached between 300 to 500 yuan. With over 700 million tons of output, the total profit potential was estimated to be around 210 billion yuan. This massive profit margin fueled the rise of numerous steel trading companies, creating a decade of prosperity.
2009 marked a turning point. After the global financial crisis, the Chinese government introduced a 4 trillion yuan stimulus package, leading to relaxed credit policies. The State Council issued "Financial Article 30," encouraging banks to support small and medium enterprises. This led to a close relationship between banks and steel traders, with loan amounts increasing dramatically—from millions to tens of millions.
Traders often joked that a house worth one million yuan could secure a 1.5 million yuan loan. Banks competed fiercely to attract steel traders, and assets previously considered low-value, like mortgages, became highly sought after. In the eyes of banks, people from Zhouning were synonymous with Fujian steel traders. A simple ID card could open the door to a 5 million yuan loan.
However, the model of five-unit joint guarantees, pioneered by Zhou Huarui, eventually led to instability. This system allowed multiple companies to guarantee each other’s loans, but when one defaulted, others had to cover the debt. This created a ripple effect, ultimately leading to the collapse of many steel trading companies.
Over time, the influence of Zhouning traders grew, and they became the backbone of Shanghai's steel trade. Their strong social networks made it easier to access credit and build businesses. In some markets, with 400 merchants, each taking out 2 million yuan in loans, the guarantee companies earned significant fees, reaching over 200 million yuan in margins.
Many traders used the borrowed funds not just for steel, but also for real estate and other investment opportunities. During the Spring Festival, luxury cars filled the streets of Zhouning, making it a symbol of wealth. But this prosperity didn’t last.
By 2012, steel prices dropped sharply, and the industry faced a major crisis. Sales profits for large steel companies fell by 98.2%, and the real estate sector continued to tighten. Banks began to recall loans, leaving many traders in a fragile financial position. Today, fewer luxury cars are seen in Zhouning, and some traders lament that banks no longer recognize their hometown identity cards.
Legal disputes have become common, with hundreds of cases filed against steel traders in Shanghai. Many banks, including Minsheng Bank and China Everbright Bank, have turned to courts to recover debts. The once-bustling Shanghai Steel Exchange Building, now empty and quiet, stands as a reminder of the past glory.
Zhou Huarui, the founder of the First Steel City, once boasted that every bank would set up branches there. Now, many of those companies have disappeared, and former executives are struggling to manage debt recovery teams. Some traders have gone into hiding, while others remain in their old offices, but without any signs of life.
Banks have also been helping steel traders by covering interest payments to avoid bankruptcy. The situation remains dire, with many traders facing uncertain futures. The once-thriving steel trade has become a cautionary tale of rapid growth and sudden decline.
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