Smaller Enterprises Doomed
Facing heavy taxes, money borrowing difficulties
and soaring manufacturing costs due to inflation,
China’ smaller enterprises are in a difficult situation.
Many enterprises in Zhejiang, Guangdong,
and Jiangsu have been shut down partly or wholly.
According to China’s Ministry of Industry and
Information Technology, from January to February,
15.8% of enterprises, except for small enterprises,
experienced a loss of 22.3%.
But the losses of small and medium enterprises,
excluded from official statistics, might be higher.
Hong Kong’s Wen Wei Po reported on May 16
that according to the Bureau of Statistics
in Guangdong, with soaring material costs,
higher wages and lending rate, the profit after tax
of Guangdong’s 37.3 thousand large enterprises
dropped 12.5% in the first quarter,
compared to January and February.
The supervisor of an aluminum sheet factory
in Foshan, Guangdong said: “The factory’s sales
last year were over RMB1billion
and tax was over RMB50million with sales tax rate
of 5%, disregarding the 25% corporate income tax.
Because the material costs keep soaring
while the product prices can hardly increase,
the profit is getting worse.”
According to The Economic Observer, Wu Qiang,
the supervisor of a corporation in Wenzhou,Zhejiang,
told reporters that doing business is hard this year,
not only for foreign trade industries
but also for manufacturers. After Qingming Festival,
enterprises in Zhejiang, Guangdong, and Jiangsu
have been shut down partly or wholly one by one.
They dare not take large orders now,
being afraid that they can’t fulfill them
from a lack of electricity and labor.
With the increasing exchange rate of U.S. dollar,
their profit gets even less.
Mr. Zhang, owner of shoe factories in Wenzhou,
also complained that the cost
of a ton of sole materials has increased
by RMB3000-4000 since last year.
The price of a pair of shoes needs to increase
by RMB3. Now glue price has doubled.
Wages increased 20% but it’s still hard to find labor.
With the limited use of power,
small and medium enterprises are doomed.
The report also mentioned that according to
Wenzhou Economic and Commercial Committee,
35 factories of glasses and lighters got fewer orders
from January to March, with sales dropping 7%,
profit dropping 30%, and an average profit of 3.1%.
Office director of the Medium and Small-Sized
Enterprise Bureau, Cai Zhangsheng, said:
“It’s even harder than 2008’s financial crisis.”
Also, the People’s Bank declared on May 12
that the deposit reserve rate will further increase
by 0.5% since May 18, and reach a new high
of 21%. An amount of RMB370 billion will be frozen.
Small and medium enterprises could only borrow
money from folk people instead of banks
and it resulted in an increasing folk lending rate,
whose annual rate could be as high as 100%.
Wu Qiang said: “In order to borrow money
from banks, some amoral enterprises
even sell their products at very low prices
to expand the output value.
They use false records to apply for loans from banks
and then lend this money on usury.”
According to The Economic Observer,
Sanqi Corporation, which produces wires, cables
and electrical devices in Yueqing and Zhejiang,
is going bankrupt because the funding chain
has broken. Jin Libin, CEO of Fuhaohuilong Group
in Baotou, Inner Mongolia, has committed suicide
because of a huge debt. It is said the corporation
borrowed RMB1.237 billion from folk loan sharks,
banks and rural credit cooperatives.
According to the People’s Bank in Wenzhou,
local banks’ lending rates have increased by 30%
to 80%. At the end of March, the consolidated
folk-lending rate in Wenzhou was 24.81%,
nearly 2% per month, which is a new record high.
The average consolidated folk-lending rate
in Wenzhou increased by 11.91% in the first quarter
this year. The monthly rate of pawn broking
has increased from last year’s 2.2% to 3%.
NTD reporters Zeng Yaoxian and Zhou Ping