Wenzhou was selected for a pilot financial reform project in March 2012 after the outbreak of a financial crisis arising from widespread loan defaults by many hard-pressed local factory owners and investors.

The crisis prompted the government to act with an overall plan to channel private sector funds, which were largely deposited in underground banks for higher returns, to properly regulated and supervised lending mechanisms.

Meanwhile, returned businessmen such as Li Jianjiang, the owner of Zhejiang Teling Light Industry Co Ltd, tried to help local companies by launching a small-loan company.

After registering a lighting company in Japan in 1993 and opening Zhejiang Teling Light Industry Co Ltd in Wenzhou as a production base in 1997, Li spent most of his time in Japan and flew back to Wenzhou once per quarter for the past two decades.

After getting involved in the financial industry in 2010, Li moved his focus back to Wenzhou and left his lighting business in Japan with his family members.

"I think the small-loan company will bring more profits as the manufacturing industry is slowing down, affected by the global recession that started in 2011," said Li.

Li added that the ongoing financial reform in Wenzhou could be a perfect opportunity to apply new concepts, approved by the central government, to offer financial support to struggling local companies.

The small-loan company was able to offer loans of over 1 billion yuan to hundreds of companies in 2012.

"I'm discussing with my business partners the launch of a private bank to break the monopoly of State-owned banks and supply loans to privately owned companies with controllable risks," said Li.