China Watch Blog has learnt that a recent study by the Economic and Trade Commission of Wenzhou, Zhejiang Province, showed that only 57.4 percent of SMEs are able to meet their financing demands while more than 42.9 percent are under financial pressure.
About 88 percent of SMEs in Shenzhen are under financial strain, and 57 percent are encountering financing difficulties, the Southern Metropolis Daily reported, citing local government data.
“While further tightening liquidity, the government should also adopt a more flexible credit policy for SMEs, especially for those companies with good sustainability and prospects,” Zhang Wenkui, deputy director of the Enterprise Research Institute under the Development Research Center of the State Council, told the Xinhua News Agency, which was reported by the China Daily.
Analysts also warned that financing difficulties had forced many SMEs to turn to microlending, whose excessive rate led to many of the bankruptcies.
Recent research by the Administration for Industry and Commerce in Wenzhou showed that 23 microlending companies in the city have a total registered capital of 5.22 billion yuan ($ 809.14 million). They also have total bank loans of 2.51 billion yuan.
According to the China Economic Weekly, the annual rate of microlending in Zhejiang has reached 100 percent, compared with many SMEs’ turnover ratio of less than 10 percent a year.
Meanwhile, the National Bureau of Statistics released data showing that 88.7 percent of the 269 sampled enterprises in Shenzhen experienced a price hike in raw materials, with an average rise of 10 percent. The price of certain materials surged by as much as 60 percent, according to the data.
“I had to raise prices after mounting labor costs and rising costs for raw materials since last year, because of which I lost a lot of business. Many foreign companies have gotten used to our cheap prices, but that era has gone,” an owner of a clothing company in Wenzhou surnamed Ji was quoted as saying by the Global Times.
SMEs in China are also coming under growing pressure from rising labour costs, particularly those in the manufacturing sector, Lu Ting, China economist at Bank of America-Merrill Lynch in Hong Kong, told the Global Times.
According to government figures, a total of 27 provinces and cities raised their minimum salaries in 2010. In March, Guangdong raised its minimum monthly payment to 1,300 yuan from 1,030 yuan last year.
“China’s labour intensive SMEs will gradually become more capital intensive and more reliant on machines, which could substantially raise productivity,” Lu said, adding that the number of SMEs will gradually diminish.If you think China Watch Blog's information is useful, click on cup of coffee on left hand side and make a small contribution via PayPal