A central bank official Thursday denied large-scale shutdowns of China’s small- and medium-sized enterprises (SMEs), and said bank lending to such businesses has increased since the beginning of this year.
Recent media reports of a wave of SME bankruptcies are not true, and the difficulties faced by the SMEs are not as serious as during the 2008-09 financial crisis, Wu Xianting, deputy head of the financial market division at the People’s Bank of China, said in an interview with the central government’s website Thursday.
For example, 14,400 and 261 companies were deregistered in Zhejiang Province and in Dongguan in Guangdong Province, China’s key manufacturing hubs, respectively, in the first half of the year, lower than the number during the same period of 2008 and 2009, he said, citing figures from local authorities.
Lending to the SMEs as a proportion of overall credit has also been rising since 2008, Wu noted. Bank loans to the SMEs amounted to 20.1 trillion yuan ($3.2 trillion) as of the end of June, an increase of 18.2 percent year-on-year.
Wu’s remarks came after media reported that the SMEs are facing shutdowns because of rising raw material prices and labor costs, as well as increasing financing difficulties brought by China’s tightening measures.
Wu said the SMEs, including those in construction, property and high energy-consumption sectors, which expanded too fast in the credit-boom period during the financial crisis, as well as those engaged in exports, are facing greater challenges.
“This is a result of China’s industrial upgrade policies,” Chen Naixing, head of the SME Research Center of the Chinese Academy of Social Sciences, told the Global Times Thursday.
Chen expects 10-15 percent of the SMEs, mainly those with low profitability, will be closed in the current round of economic restructuring.
Zhou Dewen, head of the Wenzhou Association for SME Promotion, estimated that about 20 percent of the SMEs have suspended production or produced at half capacity.
He expects the figure to double to 40 percent by the end of this year, if the government doesn’t come up with new policies to support them.
The central government is aware of the difficulties faced by the SMEs. It is planning to establish a new ministry-level agency or an inter-ministerial coordination mechanism to support the development of the SMEs, according to earlier media reports.
The central bank is also mulling on expanding financing channels for SMEs, including encouraging them to raise funds through Shenzhen’s SME and ChiNext boards, as well as allowing more banks to issue SME asset-backed securities, Wu said.