Weak SME’s in Chinese Economy

SME’s in China are in trouble due to decreasing demand and economic slowdown. To me, recent changes in the map of SME’s is a kind of  “adjustment” to clean “weak ones” from the market. Here you can read an article published in a Chinese newspaper:

SMEs told to rely less on state help (Shanghai Daily)

CHINA’S small and medium-sized enterprises should meet the challenges of a slowing economy and try to upgrade their products in the value chain as they should not expect the government to bail them out, economists said.

“The transformation of China’s SMEs is a must against the backdrop of a domestic economic slowdown and weaker external demand,” said Zhang Jun, director of China Center for Economic Studies at Fudan University. “The fall in crude oil prices on the global market offers a good platform for SMEs to upgrade with lower costs.”

Huang Haizhou, managing director of sales and trading department with the China International Capital Corp Ltd, said as the United States is still a powerful global manufacturer, Chinese companies have to constantly change and keep moving forward.

“The increase of exports contributed a lot to the pick-up of the US economy in the second half. It contrasts with the slowing pace of exports in emerging markets like China and India,” said Huang.

The US economy grew 3.3 percent from April through June, up from 0.9 percent in the first three months. It was the biggest gain since the third quarter of 2007. The smallest trade deficit in eight years led to the remarkable growth despite a sluggish US consumer market and weak business investment.

“The US is China’s second-largest trading partner. If the US becomes more self-reliant, it will pose an imminent threat to China’s exporters, most of whom are SMEs,” said Huang. “However, SMEs should not totally rely on government subsidies to overcome the current difficulties. It is not a cure at all.”

The National Development and Reform Commission said more than 67,000 SMEs were bankrupt in the first half of this year due to tight credit control, the rising yuan and weaker external demand.

To assist the troubled SMEs, China’s banks were asked to provide more loans to the firms this year

Source: Shanghai Daily

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