Guangdong export markets are largely destined to Europe and the United States, with the United States accounting for nearly 40 percent of the market shares. Export oriented processing businesses amount to 70 percent of the province businesses. That explains why Guangdong suffers most heavily in the country from the US-born financial crisis, said Li.

According to Le Zheng, president of Shenzhen Municipal Academy of Social Sciences, Guangdong enterprises differentiate among themselves in the face of the financial crisis.

"One third enterprises are barely affected by the lash and even expand their market shares, because of industrial restructuring and technological innovation," said Le Zheng.

"Another one third of enterprises are operating normally and will survive the crisis by shrinking frontlines and improving production efficiency."

"The remaining one third of enterprises might be eliminated in the crisis, because of small business scales, deficient funds, brands and technologies," said Le Zheng.

According to Li Huiqin, party chief of Houjie Town, Dongguan City, a major exporting base in Guangdong, a fairly large proportion of the processing businesses in the Pearl River Delta, including Dongguan, were transferred from Hong Kong and Taiwan in the 1980s.

It is a miracle that these out-dated, low-end commodity producers have survived for 30 years, because of low labor and raw material costs on the Chinese mainland. It is time to upgrade the industrial structure of the Pearl River Delta against the backdrop of the financial crisis.

Under the current heavy pressures, many enterprises have started to reform themselves.

Seeing its export orders cut by 30 percent, Dongguan Nanxing Plastic Co. Ltd., which was established in Hong Kong in 1957, reshuffled its marketing plan to expand the Chinese mainland market proportion from 10 percent to 30 percent.

The strategic reshuffle is what the business, a pace-setter in designing and producing 3,000 tonnes of plastic packing bags a month and exporting them to Europe and the United States, needed, said Wang Jianhua, marketing manager of the 1,000-employee company.

Da'afu Baby Carriers Co. Ltd., a 500-member business based in east China's Shanghai Municipality, is also confident of pulling through the crisis.

"SMEs like ours cannot compete with big enterprises. We are not competitive in simply expanding outputs," said Yuan Fuxiang, board chairman of the company. "But we can focus on producing high-grade products with limited market demands, such as orders of two to three containers in volume, which big enterprises will not do. This is where our competitiveness lies."

These days, the company has cut most of its 100-product mix and focused only on three leading product varieties of game beds, umbrella vehicles and cloth beds. The company makes greater profits by improving products with higher added values, said Yuan Fuxiang, with more than 400 independent intellectual properties at hand.

"The export sector needs to make an overall industrial restructuring," said Xu Quanning, secretary general of Shanghai Toy Industrial Association.

According to Xu, only 20 percent of Chinese toy exporters have independent intellectual properties, which earn 20 percent to 30 percent profits. In contrast, 80 percent of toy makers are mere processing businesses, without any brands or core technologies, thus earning only 5 percent to 8 percent profits. "The latter enterprises suffer most in this financial crisis," said Xu.

"These enterprises must save themselves by industrial restructuring, despite the help of all sorts of preferential policies from the government," said Xu.

Industrial officials estimate the fourth quarter of this year and the first quarter of next year will be the most severe periods for Chinese SMEs.

"Within three to five months, Chinese SMEs will feel the relief from the nation's economic stimulus package as long as they hold onto their capital chain at present," said Li Zibin, CASME head.

"The world has six billion people and there is a market for 6 billion pairs of shoes. So long as we hold on, we will enjoy the market opportunities," said Teng Xingbiao, board chairman of east China's Wenzhou Fuluomi Shoes Co. Ltd., encouraging his more than 1,000 staff workers these days.

Teng's company produces 240,000 pairs of children shoes a month and exports them to Europe, the United States and Australia. The firm joyously received five foreign buyers in recent days. "We are building one more production line on the basis of the existing three. We are to meet difficulties head-on."

"We are also meeting pressures from rising costs and reduced orders. But each month, we will develop more than 100 models of shoes," said Teng. "We are to rely on product development and management to improve product quality and win the market."

(Xinhua News Agency December 7, 2008)