Perilous Times for Small and Medium-Sized Enterprises

Page 15-17

Privately owned small and medium-sized enterprises lack funds, technology, and governmental support.

Li Xiaowei, the CEO of Ningbo Qixin Solar Electrical Appliance Co, says that the biggest problem is the shortage of electricity, labor and land.

The president of China Private Enterprises Association, Bao Yujun, says it’s hard for enterprises to raise money.

Chen Qun, who runs a printing firm, says that many company owners choose to close down or sell out and invest in fixed assets in other cities.

However some companies are trying to find ways to survive. Xu Ningning, the CEO of Hengshuai Motor Co, says his firm introduced international advanced technology and won business from foreign companies.

Bao Yujun says that the government should open up to private investors industries that are restricted such as education and medical treatments.

Eyes Glasses Manufacturers - Younger Workers Becoming Scarce

Page 18

One manufacturer of eye glasses has only been able to hire 40 workers this year - 16 less than he needs – and among those workers, only four were born after 1990.

Wages have risen steadily since 2000, with workers’ living conditions also improving, but factories still face labor shortages.

Packaging & Printing Enterprises - an endless wait for credit payback

Page 19

Chen Qun, who runs a packaging and printing company, says that he is afraid of receiving new orders because so many firms are defaulting on payments. They’re used to selling products before receiving payment, but in the past they received the cash within thirty one days; now they have to wait three months or more.

Electric Components Makers Shoved out of Shenzhen

Page 20

The biggest challenge for electric components makers in Shenzhen is the government’s upgrading policy, which is pushing traditional businesses out of Shenzhen to make way for high-tech manufacturers.

The government has raised the cost of land, basic facilities and labor. Many companies have reluctantly moved to other cities, but some have stuck at it.

Clothing Firms: on the Edge of Bankruptcy

Page 21

Zhou Aizhen, who runs a clothing factory in Guangdong Province, says that many small and medium-sized clothing firms are close to bankruptcy. They can’t afford designers and don’t have the credentials to get loans from the bank. The cost of materials, labor and logistics are increasing.

The boss of a clothing company says that since 2010, the rise in costs of labor and material is about 15% and 20% respectively.

Household Appliance Makers: Cash Flow Problems

Page 22

Household appliance makers are facing problems: raw materials stocks are decreasing, finished products inventories are increasing and accounts receivable are growing. In order to raise money, household appliance firms have to cut inventories through bulk sales.

Motor Maker Fears Currency Fluctuations

Xu Ningning compares his motor-producing company to a bull. 20 years ago, his calf was young, and when it came across any difficulties he could just hold it in his arms. However, now that it has grown into a big bull, Xu can’t take hold of his business when it’s facing difficulties. Currency fluctuations and labor shortages are the new problems. Over the past 20 years, he tried his best to develop the company by selling motors to foreign companies at low prices, hoping that he would eventually be able to sell the high-quality products domestically too.

Turning to Hong Kong for Cash  

Page 24

With monetary policy tight, some businessmen prefer to raise money in Hong Kong. Mr. Zhang, who ran a foreign trading enterprise, says that many people around him have founded their own companies in Hong Kong to raise money there.

Furniture Manufacturers Suffer with Real Estate Market

Page 25

With the disruption of home purchases, furniture manufacturers are experiencing falling sales and profits. The increasing cost of store rent, labor and transportation has aggravated the situation. “So far, our profit is only 10% to 15%. We have cut our advertising expenses and chosen a smaller store,” said Lu Kaifeng, a manager of a furniture manufacturer in Hubei.

Chengdu’s High-Tech Development Zone:

Page 26

With multinational software corporations such as IBM, NOKIA, Huawei and Alibaba already in Chengdu’s high-tech development zone, about 500 small and medium-sized companies have also based themselves there. Support from local government such as tax incentives and subsidies, have made it easier for these companies to develop.

Culture Industry

Page 27

The government of the Qujiang new district of southeast Xi’an provides various kinds of subsidies and financial support for companies of the culture industry, including tax incentives, housing subsidies and loan guarantees. It’s particularly difficult for companies in the cultural industry to get loans from banks.

Don’t Let Inflation Fear Kill Off Small and Medium-Sized Firms

—Interview with Zhou Dewen, the Vice President of China Association of Small and Medium Enterprise

Page28-29

If the credit squeeze continues, then in the second half of this year, about 40% of small and medium-sized companies will be forced to close or go bankrupt.

Privately-owned companies are facing five major problems: the yuan’s appreciation, inflation,  labor shortages and pressures from energy saving plans.

The upsurge of bankruptcy among small and medium-sized companies is not only an economic issue but also a social problem.

Private Enterprises Need Innovation

—Interview with Bao Yujun, the President of All China Private Enterprises Federation

Page 30-31

Private firms need to be more innovative.

~ The property rights of small and medium-sized companies are comparatively weak and not transparent enough. Many enterprises have noticed this problem, so they’re try to cooperate with others and become joint-stock companies.

~ Among private enterprises, more than 70% are family-owned companies. The management of family-owned firms don’t work.

~ Many companies lack patents and so have very little pricing power.

~ Many companies prefer price wars, which creates win-lose situations. This is most common among companies that lack sales channels and famous brands.

~ It’s hard for the Chinese economy to develop if the government doesn’t relax market accessibility in some areas. China needs to reduce the role of government funds in investment.

Commodities stacking up in Port

Page 39

Many raw materials have been stacking up in ports over the first half of the year as tighter monetary conditions make it harder for buyers. Among these commodities are iron, soybean, rubber and plastic. Many small and medium-sized companies have changed the way they purchase raw materials, preferring to put in small orders, postpone payments and use bank’s acceptance bills.