Related News
Profit margins fall fuels bigger worry
By Maggie Zhang |
September 26, 2011, Monday
|
Print Edition
Print Edition
THE squeeze on capital affecting many small business in the Yangtze River Delta is unlikely to spark company closures in the southern Chinese province of Guangdong whose firms worry more about shrinking profit margins, said one industry watcher.
Small enterprises in Guangdong are less leveraged than their peers in places like Zhejiang and Jiangsu provinces, which border on Shanghai, so they have less exposure to tight monetary policy, said Xie Hong, secretary general of the Guangdong Council for the Development Promotion of Small and Medium Enterprises.
Companies in Guangdong are traditionally cautious about rising debt, so when China tightened its monetary policy the impact is more serious in the Yangtze River Delta than that in the southern province, he said.
"Some enterprises have reduced their production scale, but the tide of business failures seen in the Yangtze River Delta hasn't taken hold there (Guangdong) yet," Xie said.
"It's true that many small enterprises in Guangdong also find it difficult to get financing, but their main headache is not financing but rather shrinking profit margins due to rising costs," he said. "Even when the orders are there, the good old days of cheap labor and raw material costs are gone."
But Xie pointed out that while the revenue of an export-driven small firm has risen 60 percent in the first half, its profit has gained only 3 percent.
He said the battle to control costs and tighter credit are major concerns for small businesses.
Guangdong, which sits just west of Hong Kong, is called the "factory to the world" because it exports the bulk of the toys, shoes and other Made in China goods that flow to the United States, Europe and other markets. About 1 million small enterprises operate in Guangdong, which was among the first areas to benefit from China's opening-up economic policies launched three decades ago.
The Yangtze River Delta is famous for its booming private credit market. When companies find it difficult to get loans from banks, they get them from the gray area of private credit houses, which could charge rates much higher than lenders. When China tightened its liquidity, the rates charged in the private market could also rise and may cause cash disruption which could affect companies.
Xie said the council has set up training programs, in partnership with US-based Halter Financial Group, to help small enterprises restructure, upgrade or even go public.
"The slowdown in China's economic growth may not be a bad thing," Xie said. "It is helping push small enterprises to climb the value chain. While it's true that some enterprises will be forced to close as demand from Western markets weakens, the ones that add value to their operations will survive and thrive."
Small enterprises in Guangdong are less leveraged than their peers in places like Zhejiang and Jiangsu provinces, which border on Shanghai, so they have less exposure to tight monetary policy, said Xie Hong, secretary general of the Guangdong Council for the Development Promotion of Small and Medium Enterprises.
Companies in Guangdong are traditionally cautious about rising debt, so when China tightened its monetary policy the impact is more serious in the Yangtze River Delta than that in the southern province, he said.
"Some enterprises have reduced their production scale, but the tide of business failures seen in the Yangtze River Delta hasn't taken hold there (Guangdong) yet," Xie said.
"It's true that many small enterprises in Guangdong also find it difficult to get financing, but their main headache is not financing but rather shrinking profit margins due to rising costs," he said. "Even when the orders are there, the good old days of cheap labor and raw material costs are gone."
But Xie pointed out that while the revenue of an export-driven small firm has risen 60 percent in the first half, its profit has gained only 3 percent.
He said the battle to control costs and tighter credit are major concerns for small businesses.
Guangdong, which sits just west of Hong Kong, is called the "factory to the world" because it exports the bulk of the toys, shoes and other Made in China goods that flow to the United States, Europe and other markets. About 1 million small enterprises operate in Guangdong, which was among the first areas to benefit from China's opening-up economic policies launched three decades ago.
The Yangtze River Delta is famous for its booming private credit market. When companies find it difficult to get loans from banks, they get them from the gray area of private credit houses, which could charge rates much higher than lenders. When China tightened its liquidity, the rates charged in the private market could also rise and may cause cash disruption which could affect companies.
Xie said the council has set up training programs, in partnership with US-based Halter Financial Group, to help small enterprises restructure, upgrade or even go public.
"The slowdown in China's economic growth may not be a bad thing," Xie said. "It is helping push small enterprises to climb the value chain. While it's true that some enterprises will be forced to close as demand from Western markets weakens, the ones that add value to their operations will survive and thrive."
- About Us
- |
- Terms of Use
- |
-
RSS - |
- Privacy Policy
- |
- Contact Us
- |
- Shanghai Call Center: 962288
- |
- Tip-off hotline: 52920043
- 沪ICP证：沪ICP备05050403号-1
- |
- 互联网新闻信息服务许可证：31120180004
- |
- 网络视听许可证：0909346
- |
- 广播电视节目制作许可证：沪字第354号
- |
- 增值电信业务经营许可证：沪B2-20120012
Copyright © 1999- Shanghai Daily. All rights reserved.Preferably viewed with Internet Explorer 8 or newer browsers.
