SMEs key to China's growth, yet they struggle with high wage, credit costs
Surging wages and higher borrowing costs put SMEs at a disadvantage, threatening the productivity gains needed to transform larger economy
Growing competition and cooling demand amid slower economic growth have added to pressure on mainland entrepreneurs to explore more profitable forms of expansion and reduce their reliance on cheap labour.
Small, private manufacturers say workers have stepped up wage demands, with labour costs rising by double-digit percentages in the past few years.
Meanwhile, tight credit supply through normal banking channels has made it harder to survive, let alone expand, managers told the South China Morning Post.
Failing to move up the value chain fast enough might see the mainland lose the battle to boost productivity and transform itself into a high-income economy, as countries such as Vietnam and Cambodia emerge as new, cheap global factory centres.
The rate spread between formal and shadow credit nationally was the highest … in a year
Tianjin Chuangda Construction chairman Xu Jilai said profit margins at his company had fallen to as low as 6 per cent, from about 10 per cent in 2008-2009 when the government injected 4 trillion yuan (HK$4.54 trillion) of credit to combat the effects of the global financial crisis.