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SMEs Outlook Brisk Despite Challenging Times

Some of the small and medium-sized enterprises (SMEs) in China facing operational crises have walked out of the shadow with a basket of positive policies from the central and local governments.

Industrial insiders believe that the prospect of SMEs remains brisk despite the negative market elements due to strong government support and timely strategic restructuring.

According to the latest statistics released by the National Development and Reform Commission, SMES polled around the country achieved 6.58 trillion yuan industrial output in the first five months of this year. Their profits increased by 30.8 percent from a year ago to reach 625.8 billion yuan.

The textile sector, where a majority of the companies are SMEs, recorded a year-on-year growth of 17.4 percent in sales and 8.4 percent surge in profits during the period from January to May.

A previous survey showed that at least 67,000 SMEs in China suffered losses or even closed in the first half of this year and two-thirds of the textile SMEs needed restructuring. At the same time, more than 20 million workers were laid off.

However, the survey also showed that nearly 20,000 SMEs were founded in China by June 30 this year.

Shui Pi, a senior commentator, said the nation has launched a package of policies, including finance, tax and credit, to help SMEs out of the operational difficulties.

"The central government has fully addressed the major problems of SMEs, such as raising the export tax rebate for labor-intensive industries including textile and increasing the credit limits to the SMEs," he said.

Some local governments, especially in the coastal provinces home to numerous SMEs, have launched incentive policies to stimulate the development of SMEs.

In east China's Zhejiang Province, the government allocated 65 million yuan to serve as a risk compensation fund so that SMEs could get extra loans of 26 billion yuan from the financial institutes.

The government of south China's Guangdong Province promised to allocate 40 billion yuan in the next five years to support SMEs and remove the barriers for SMEs to get loans easily.

Liu Pin'an, a senior researcher with Guangdong Academy of Social Sciences, said polices are working on some of industries, including hardware, garments, food, textiles and electronics, which are back to the normal track.

"Our surveys show that the improving support from the government has received wide recognition from SMEs," Liu said.

China's SMEs, which are still weak in global competition without self-owned intellectual property rights and brands, have been struggling to survive in the adverse markets including the shrinking demands from the major importers, price increases for raw materials, rising labor costs and appreciation of the yuan.

(China Daily September 22, 2008)

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