China's SMEs struggling for land and private capital

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China's SMEs struggling for land and private capital

(Xinhua) 20:54, November 12, 2013

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NANNING, Nov. 12 -- Zhou Bailin has been feeling a little jaded recently. His company just received an order worth over 400 million yuan (about 65.6 million U.S. dollars), but he had to hold back from the lucrative deal.

"My factories have now all stalled because we could barely finance continued production," Zhou said.

Zhou is the general manager of Giga Solar Co., Ltd., located in Xing'an County in south China's Guangxi Zhuang Autonomous Region.

The company, which produces crystalline silicon solar cells, has run out of capital because of anti-dumping duties imposed by the European Union for over a year.

The company could easily resume production if Zhou could obtain circulating capital of 50 million yuan, which is impossible at the moment, according to Zhou.

"I feel like I am stuck in a moor and there seems to be no financing straw for me to clutch at," he said with a sense of helplessness.

This is just an example of what China's small- and medium-sized enterprises (SMEs) are going through.

According to a recent report published by Standard Chartered Bank, the confidence index of China's SMEs in the second quarter of this year fell by 4.47 percentage points after bouncing in the first three months.

The report shows that SMEs are cautiously optimistic about an economic recovery amid China's decelerating growth, and their confidence index has decreased in terms of operation, investment and financing.

FINANCING PAINS

Zhang Liangjie, board chairman of the Liuzhou Longjie Automobile Fittings Co., Ltd., a powertrain component manufacturer in Guangxi, said that his company needed loans to upgrade its production line due to high product requirements by overseas customers.

"We need up to 10 million yuan to complete the upgrading process, but it's hard to find the money," Zhang said.

The financing troubles will disrupt the development plans of emerging companies like his, said Zhang, who had his factories built in the industrial city of Liuzhou, home to several well-known brands such as Liuzhou LMZ Co., Ltd. and Guangxi Golden Throat Group.

Banks are reluctant to grant loans to SMEs, which usually lack collateral and sufficient certificates.

Yuan Chiping, deputy director of the Center for Studies of Hong Kong, Macao and Pearl River Delta at Sun Yat-sen University, said that what deters financial institutions from providing loans is that SMEs make too little profit.

Adding to the financing pains are additional costs, said an executive of a small local company in Guangxi, who refused to be named.

"Suppose we borrowed 10 million yuan. We would have to take out money to cover additional costs like accruement, deposit, and consulting fees, among others, after which only 8 million yuan would be left," said entrepreneur.