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Smaller players reeling from bale of bad news

By Zhan Lisheng in Guangzhou and Zhou Yan in Shanghai (China Daily)
Updated: 2008-07-18 07:56

The big company names hog the headlines of global business, but China is a country of small enterprises.

They are known as the SMEs, or small and-medium-sized enterprises.

Used to riding on the economic growth of the past few decades, these SMEs are now faced with a host of new challenges.

There are nearly 300,000 SMEs in China, providing more than 56 million jobs compared with the 17 million in large companies, figures from the National Bureau of Statistics have shown.

Since the end of last year, SMEs in China have been hampered by rising material costs and sluggish demand worldwide, as well as by higher labor costs and new government regulations at home. As profit margins wear thin, many are throwing in the towel.

A worker walks past lines of bobbins in a workshop of a textile company in Anhui province on July 9 2008. Small and medium-sized enterprises in the country have been reeling from a host of challenges that include rising material costs and sluggish global demand. [China Daily]

The name of the game has turned to one of waiting - waiting for the next cheap site to relocate businesses, waiting to learn of the next resource-saving technique, and perhaps, more importantly, waiting for any sort of guidance from Beijing for the road ahead.

Until then, anything goes.

Staying or leaving

It is a question that has been bugging Simon Leung for some time.

The Hong Kong businessman owns a toy factory in Dongguan, the southern boomtown famous for small manufacturing outfits set up by overseas investors.

For the last several months, Leung has been mulling over new inroads for his business - relocating his plant to Vietnam, or remaining in the Pearl River Delta city.

"It's not an easy choice," Leung told China Daily last Friday.

"I really don't know how I can make any profit by staying here, while relocating would bring with it more uncertainties."

Leung said his worries from staying in China are, among others:

*a rise in the minimum wage set by the local government;

*the government's raising of environmental standards;

*a short supply of labor and electricity;

*hikes in raw material prices;

*the appreciation of the yuan against the US dollar;

*and the new labor contract law which makes it more difficult to terminate employment contracts.

Yet, for all his grouses, moving to Vietnam is not expected to bring with it much assurance. Investors have to set up their own factories there and cannot rent manufacturing facilities as easily as in Dongguan, he said. That alone is making him hesitate.

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