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China helps SMEs tide over difficulties

(Xinhua)
Updated: 2008-12-06 12:33

China raised tax rebates on Nov. 1 for 3,486 items ranging from labor intensive industries such as textiles, garments, toys, hi-tech and high-added-value sectors like anti-AIDS drugs.

Wang Liming, director general of the SMEs department of the Ministry of Industry and Information Technology (MIIT), said the country might further raise the tax rebates rate by one percentage point for some labor-intensive industries in the near future to help them cope with shrinking profit margins because of slacking market demands, the yuan's appreciation and rising production costs.

In addition to all this support, the government is encouraging SMEs to accelerate industrial restructuring and innovation.

"The financial crisis has exposed some interior problems with our enterprises," said Li Huiwu, deputy director of south China's Guangdong Provincial Development Research Center.

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.

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