China SME Confidence Index down

However, there is still increasing commitment to growth plans. Instead of scaling back investment, 62 percent of companies plan to boost capital and equipment levels - up 5 percent from last year - and more than half of the companies vowed to expand their employee numbers, slightly higher than last year.

But analysts believe the improved situation is mainly a result of the shrinking production caused by lackluster global demand, which prompted fewer firms to ask for loans.

The annual survey drew opinions from top executives of 100 SMEs nationwide, covering sectors such as textiles, machinery, food and the Internet. This year, SMEs are having an easier time securing loans from banks compared with last year, highlighting increased market fluidity. More than a third of the surveyed firms now believe that getting loans is "normal", doubling the percentage from the previous year.

High taxation surfaced as the top concern in this year's survey. About a quarter of the companies said they feel burdened with unaffordable taxes, citing it as their biggest headache.

Meanwhile, rising costs are worrying at least 19 percent of business owners, while loan barriers ranked as the third-biggest hurdle.

However, easier access to loans is a "false proposition" because there are simply fewer companies trying to get loans, according to Zhou Dewen, chairman of Wenzhou SME Development Association. "Most SMEs are being squeezed by rising costs and shrinking demand. Why would they bother getting loans?" Zhou asks.