Recently there has been a lot of news about the closure of small and medium-sized enterprises (SMEs) and it seems that SMEs are in a difficult situation. According to Zhu Hongren, spokesman of the Ministry of Industry and Information Technology (MIIT), in order to help SMEs, especially micro enterprises, sail through difficulties, the state is studying policies and measures aimed at further supporting the development of SMEs. At the same time, more support policies would be offered to micro enterprises.
Factors making SME operation difficult
The recent closure of a toy factory (Soyea) and a knitwear factory (Dingjia) in Dongguan has aroused the concern of the public, sparking worries that it will usher in a new round of SME wind-up.
In response to this, Zhu Hongren said, “At present, there is no sign of a surge in SME closure. But to be frank, lately, the sailings of some SMEs are rather difficult.” According to Zhu, the difficulties faced by SMEs are many. The risk-aversion capability of SMEs, especially small and micro enterprises, is weak; they lack normal financing channels and are vulnerable to changes in production factors. Under the circumstances where prices of energy and raw materials in the upstream supply chain rocket while costs of labour and financing continue to climb, production and operation have become more difficult.
However, figures released by MIIT show that in the first half of this year, the value-added of large-scale enterprises (with annual sales over Rmb5 million) rose 14.3% year-on-year, with the first quarter growing 14.4% and second quarter growing 14%. There are no apparent signs of marked fluctuations warranting worry.
Zhu also pointed out that in the second half of the year both internal and external pressures on the operation of enterprises will increase. While enterprises will face the problem of profit and loss polarisation, the prospects of energy saving and emission reduction are pessimistic, and the difficulty of industrial restructuring is growing. Efforts have to be made to prevent these emerging problems from evolving into trends, which will in turn affect the overall situation.
Policy to tilt towards micro enterprises
“Against the backdrop of credit squeeze, difficulty in financing has become one of the acute problems facing SMEs, especially small and micro enterprises.” Zhu also reckoned that as the pace of global economic recovery slackens, the prices of energy and raw materials fluctuate at high levels, and the costs of corporate financing and labour go up, the difficulties faced by small and micro enterprises are particularly acute.
According to statistics released by the central bank, in the first half of the year, the balance of SME loan at financial institutions grew 18.2% year-on-year, which was 1.3 percentage points higher than that of other types of loan. Zhu remarked that the State Council is organising a meeting on SMEs to look into policies and measures aimed at further supporting the development of SMEs.
It is worth noting that in June, MIIT, National Bureau of Statistics, National Development and Reform Commission, and Ministry of Finance published a joint circular on the classification of SMEs under which SMEs are classified into medium-, small- and micro-sized. Zhu said after this classification, various policies will tilt more towards micro enterprises, thereby creating a more favourable environment for the growth of enterprises, formulating general preferential policies, and strengthening public services. This will further strengthen the support for small and micro enterprises.
