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Policies help SMEs in PRD region

By LIANG QIWEN (China Daily)
Updated: 2008-12-08 07:58

The latest policies announced by the central government, such as expanding domestic demand and freezing minimum wage, have helped small and medium enterprises (SMEs) fight the global economic turmoil, entrepreneurs in Pearl River Delta (PRD) says.

Related readings:  Changing times in Pearl River Delta region  China helps SMEs tide over difficulties

The central government said last month it would loosen credit conditions, cut taxes and embark on a massive infrastructure spending program in a wide-ranging effort to offset adverse global economic conditions by boosting domestic demand.

A 4-trillion-yuan stimulus package initiated by the central government will be spent over the next two years to finance programs in 10 major areas, such as low-income housing, rural infrastructure, water, electricity, transportation, the environment, technological innovation and rebuilding from several disasters, most notably the May 12 earthquake.

The policies include a comprehensive reform in value-added taxes, which would cut industry costs by 120 billion yuan.

The Ministry of Labor and Social Security has told local governments not to increase minimum wage levels in a bid to help companies cope amid the global financial crisis.

Local governments have also been advised to consider reducing medical and accident insurance premiums to ease burdens on businesses and employees.

"The news is very encouraging and we are more confident of our future," Soddy Huang Ming-chih, executive vice-president of the Association of Taiwan Investment Enterprises on the Mainland, tells China Business Weekly.

Huang has five enterprises in the PRD, producing furniture, lights and hardware, and hiring more than 10,000 employees.

"Many entrepreneurs have lost a lot of money as the number of orders from the world market have been significantly reduced. However, the favorable policies are expected to fill up the loss," Huang says.

One of Huang's biggest businesses is producing and selling lights for export to the United State and Europe. Huang says the economic crisis has caused his export volume to drop by 20 percent.

In 2000, Huang tried to sell his products on the domestic market, but the experiment was unsuccessful.

"The business was very hard," Huang says. "Cooperation with domestic shopping malls was very difficult."

The malls won't pay him money for the products until they are sold out. But malls often put off paying money even when the products are sold, he says.

Huang stopped his domestic business last year, but now, he says he's returning to the market.

"That's the only way that we can maintain our business," he says. "I believe the central government's expansion of domestic demand will be helpful.

"Many Taiwan enterprises have told me that they are more optimistic about the future now, and they are considering shifting the focus of their business from the world market to the domestic market," Huang says. "The policies have solved extremely urgent problems."

Because of the financial crisis, in the PRD, about 30 percent of overseas-invested firms, including ones from Hong Kong, Macao and Taiwan, are losing money, according to the department of foreign trade and economic cooperation of Guangdong province.

About half of them can barely balance their books and expenses, with only 20 percent seeing slight profits.

This is compared with as many as 90 percent of the firms making considerable more profits during good times, the department says.

The increased margin of export volume of the first nine months already dropped by 13 percent from the same period last year, it says.

The reduction of export volume directly caused foreign investors to lose confidence and desire to invest in Guangdong.

Similarly, from January to September, contractual foreign investment in the province fell by 12 percent from the same period of the previous year.

The negative economic impact is expected to last till the end of next year, the department says.

Provincial and municipal authorities are rolling out a slew of additional measures to help affected companies with the crunch.

In Dongguan, which has more than 15,000 overseas-invested companies, local authorities have allocated 4 billion yuan to help firms cope with the financial fallout.

In Shenzhen, the mayor Xu Zongheng, has led a group of government officials to visit more than 200 SMEs, comforting them and encouraging them to maintain their business in the city.