Caixin
Mar 09, 2012 05:05 PM

SMEs' Costs Soared in 2011, CPPCC Delegate Says

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(Beijing) – Operating costs for small and medium-sized manufacturers increased30 percent in 2011 from a year earlier, a delegate to the Chinese People's Political Consultative Conference says.

Hu Chengzhong, vice chairman of the Zhejiang Federation of Industry and Commerce, an organization of businessmen and industrialists, said at the annual meeting of the political advisory body in Beijing on March 9 that small and medium-sized enterprises (SMEs) were facing great difficulties. Besides rising raw material and labor costs, Hu also cited a 15 percent increase in the minimum wage in 2011 over a year earlier as also straining SMEs.

It was also hard for SMEs to get financing, he said, pointing to commercial banks raising their interest rates, which increased financing costs. If SMEs borrowed money from private sources, Hu said, the interest rate was four times that of banks' benchmark rates.

The CPPCC delegate complained about the tax burden on SMEs, saying they lost 30 percent of their profit to various taxes. Administrative expenses also ate into profits, Hu said.

Data from the Zhejiang Bureau of Statistics shows that 14,447 SMEs in the province filed for bankruptcy in the first half of 2011. The coastal province is known for a bustling private sector.

Since SMEs were the nation's main job-creating force, financial institutions should lower their lending rates and extend repayment periods so SMEs can upgrade technologies, Hu said.

The government should implement tax cuts and support private banks so SMEs could get financing.

According to a report released by the Ministry of Industry and Information Technology on March 8, only 15 percent of SMEs got loans from banks and other financial institutions in 2011. The lending rate they received was 20 to 30 percent higher than the benchmark interest rate. This figure sometimes reached 50 percent.

 

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