China'S Most Dynamic Economic Group, Small And Medium-Sized Enterprises Are In Trouble.

China's small and medium-sized enterprises have become the most dynamic economic groups.

According to statistics, since 2003, the national economy has increased by 9.5% annually, while the added value of small and medium-sized industrial enterprises and non-public sectors of the economy has increased by 28% annually.

By the end of June 2007, the number of small and medium-sized enterprises in China has reached about 42000000, accounting for 99.8% of the total number of Chinese enterprises. The number of SMEs registered by the industrial and commercial sector reached 4 million 600 thousand, and the number of self-employed households reached about 38000000.

The final product and service value created by small and medium-sized enterprises is equivalent to about 60% of the gross domestic product. The tax revenue is about 53% of the total tax revenue of the country. The goods produced account for 58.9% of the total social sales, and the merchandise imports and exports account for about 68%.

In 40 industries, the proportion of small and medium-sized enterprises in 27 industries has exceeded 50%, and in some industries, it has exceeded 70%, which has become the main body to promote the development of the industry.

But at the same time, the SMEs in China are facing a series of problems, including their own strategic difficulties in the development process and the constraints of external environment on the development of enterprises.

In view of the economic environment of SMEs, the main reasons for the stagnation of SMEs are: the cost of raw materials and energy has been greatly improved, the profit margins have been greatly reduced, labor costs have risen, and the advantages of low labor costs have been weakened; tight macro-control policies have resulted in financing difficulties, and the capital chain of SMEs is under pressure.

With the sharp rise in the price of international crude oil, steel and all kinds of nonferrous metals, the cost of production of small and medium-sized enterprises has risen sharply. According to the statistics of Zhejiang Province, the purchase price of raw materials and power fuels increased by 11% in the first quarter of this year compared with the same period last year, while the ex factory price of industrial products increased by only 4.2%. The difference between them rose from 5.7 percentage points last December to 6.7 percentage points at the end of the first quarter of this year.

The original low profit mode of SMEs is faced with severe challenges.

However, because of the limited bargaining power of SMEs, the upstream cost growth can not increase the price of products, resulting in a significant reduction in profits.

The labor contract law, implemented in January 1st this year, has standardized the employment of enterprises, effectively safeguarded the rights and interests of workers, and increased the income of migrant workers.

However, due to the implementation of the labor contract law, the labor cost of the original small and medium-sized enterprises has been greatly raised, including the "hardware" such as labor insurance for employees and the compensation paid by enterprises when the labor contract is terminated and the paid vacation costs for workers. The average cost of recruiting workers has increased by nearly 20% (the cost of labor in Ningbo has increased by about 15% in Quzhou, and the increase in 20% to 30% in Hong Kong), and the profits of enterprises have dropped by 2% to 5%.

Besides, profit margins are getting smaller and smaller. SMEs also face difficulties in financing.

Over the past year, China's central bank has raised interest rates for 5 times in a row, and the deposit reserve rate has increased by 17.5% over the past 16 times.

Because of tight money, many small and medium-sized banks which rely on bank loans face severe financial problems.

According to statistics, more than 90% of SMEs face financing pressure.

Because banks tighten credit policies, and SMEs have no way to meet the assets collateral and guarantee requirements of banks, there is no effective credit rating agency in the market, which makes the capital chain of small and medium-sized enterprises face enormous pressure.

In addition, even if SMEs can obtain loans from banks, they can not enjoy preferential lending rates as well as large enterprises.

For example, many famous small and medium-sized enterprises in Wenzhou increase interest rates by millions each year.

The rising cost of financial financing also threatens the survival of small and medium-sized enterprises.

From 1 to February 2008, the financial expenses of Enterprises above Designated Size in Zhejiang increased by 35.5%, of which interest expense increased by 43.3%, exceeding the increase of bank loans by 20.9%.

The financial pressure is increasing and the funds are even more short. This leads to the tight cash flow of small and medium-sized enterprises, which makes a group of enterprises with poor risk tolerance to be closed down.

The direct financing of SMEs is also difficult to obtain.

Although the SME board has been launched on the Shenzhen Stock Exchange since 2004, the listed companies must meet certain conditions of financial indicators, including the net profit of the most recent 3 accounting years is more than RMB 30 million yuan; the net cash flow generated by business activities in the recent 3 fiscal years has totaled more than RMB 50 million yuan; or the recent 3 fiscal year revenues have totaled more than RMB 300 million yuan; the total capital stock before issuing is not less than RMB 30 million yuan; the proportion of net assets (excluding land use rights, water aquaculture rights and mining rights) in the last period of the last period is not more than 20%;

By the end of 2006, the average profit of China's small and medium-sized manufacturing enterprises above designated size was 3 million 642 thousand and 200 yuan, which was far below the standard of net profit accumulated over RMB 30 million yuan in the three fiscal years.

In China, there are only 299276 small and medium-sized manufacturing enterprises above Designated Size, and only 221 of them are listed in the SME board financing, accounting for only 0.07% of the total.

From this we can see that China's SMEs have great problems in financing channels.

RMB appreciation and changes in tax policies have led to the severe situation of export oriented enterprises.

In 2006, the yuan appreciated by 3.35%, and in 2007 it appreciated by 6.2%. In the first three months of 2008, it appreciated by over 3%. The appreciation of the renminbi against the US dollar is accelerating.

With the reduction of export tax rebate rate, as an important contributor to GDP, export oriented enterprises are facing tremendous pressure.

Comparatively speaking, the ability of large export enterprises to resist RMB appreciation is stronger because the large export enterprises have advantages in negotiating export prices, increasing the cost of their own appreciation of RMB appreciation and RMB forward hedging.

As a major component of China's export trade, small and medium-sized export enterprises are most affected by the appreciation of the renminbi.

According to statistics, the profit after tax of small and medium-sized export enterprises in 2007 mainly concentrated within 3% and 3%-5% interval, accounting for 57%, while 3% of them accounted for 30.4%, accounting for only 5.45% of profit margins above 15%.

It can be seen that under the current background, most small and medium-sized export enterprises have low profit margins, and the appreciation of the renminbi against the US dollar is undoubtedly eroding the already weak profit margins.

Textile, clothing, footwear and hat manufacturing industry suffered the greatest impact.

The profit margin of 84.07% of the export enterprises in these industries is less than 5%. Secondly, 5%-10% accounts for 6.67%, 10%-15% accounts for 4.13%, while profit margins above 15% are 0, which fully shows that these industries are facing the most severe test of survival in the context of the rapid appreciation of the renminbi.

A considerable number of small and medium-sized enterprises have failed because of the appreciation of the renminbi.

As of May 2008, China's trade surplus decreased from 26 billion 890 million US dollars to 20 billion 200 million US dollars in the same period last year.

According to export volume, export growth this year dropped to 10.7% from 23.3% in the first five months of last year.

According to the data of the Wenzhou Development Promotion Association, 20% of the more than 30 SMEs in Wenzhou are in the process of shutting down or halting production, that is, 6, and at least 4 of them have gone bankrupt.

Because small and medium-sized export enterprises are at a disadvantage in bargaining power, these export enterprises can hardly adopt the way of raising export prices to cope with the adverse effects of RMB appreciation.

At the same time, the awareness of small and medium-sized export enterprises in avoiding exchange rate risk is also lacking. Hedge is seldom used to avoid foreign exchange risk.

The first reason is that hedging tools will further enhance the cost of SMEs, and secondly, the market lacks effective services to provide hedging for SMEs.

In addition, these export and foreign trade enterprises are in a predicament because of the combined influence of raw materials, labor costs and the impact of the debt crisis on the international market and weak demand prospects.

Under the adverse factors, the external environment of enterprises is mostly around the global economic development trend, and naturally can not be changed according to the wishes of enterprises. As a single economic entity, enterprises can only choose to follow the trend and adjust their business strategies according to the general trend to achieve sustainable development.

In recent years, although China's small and medium-sized enterprises are facing various problems, a number of enterprises have developed well and have taken the lead.

Referring to the list of the most potential SMEs in Forbes magazine, we can see one or two.

The list of the most potential small and medium enterprises launched in 2008 has increased from 500 million yuan to 1 billion this year when the list of small and medium enterprises was first launched in January 2005. The size of the selected enterprises has also increased to 200 from the first 100 listed companies for the first time, and even 15 of the last listed companies have been excluded from the "small and medium-sized enterprises" because sales revenue in 2006 has exceeded the upper limit of 1 billion yuan.

Compared with large enterprises, small and medium-sized enterprises are small in scale, backward in technology and equipment, and lack of funds. They are disadvantaged in the competition, but the advantages of small and medium-sized enterprises are also reflected in the small scale.

Because of its small size, small and medium-sized enterprises have the characteristics of strong autonomy and strong adaptability. This characteristic has a strong advantage in coping with the sudden change of external environment.

We believe that small and medium-sized enterprises need to do something in order to survive and develop in the face of all kinds of unfavorable factors: relying on external economies of scale; establishing cooperative relationship with large enterprises; refining division of labor; strengthening technological innovation and enhancing core competitiveness; accurate market investigation is very important for differentiated competition, sometimes an excellent market opportunity comes from a casual observation.

I think we can refer to the list of the most potential small and medium enterprises launched by Forbes magazine in 2008.

In terms of geographical distribution, enterprises in the three developed areas, including the Yangtze River Delta, the Pearl River Delta and the Bohai rim, accounted for 67%, of which 35% were the Yangtze River Delta, 17% of the Pearl River Delta, and 16% of Bohai rim.

The Yangtze River Delta region has gathered 32% of the small and medium-sized enterprises in China. Meanwhile, the industrial clusters in the region also have clear characteristics, such as automobile, iron and steel, pharmaceuticals, petrochemical, silk, electronics and other industries, such as Shanghai, Hangzhou, Suzhou and other developed industries, such as the footwear industry, lighters, plastic films, glasses, low voltage electrical appliances, Ningbo plastics mold, household appliances, clothing and so on, Taizhou's pump industry, Shaoxing's light textile, Yongkang's hardware, Yiwu's small commodity, the worn necktie, the Datang stockings industry and so on.

A large scale industrial cluster constitutes a complete industrial chain, where each SME is in different positions and coordinated development, greatly reducing the cost of information and logistics, reducing waste caused by duplication of investment, and forming a benign interaction.

To establish close cooperation relationship with large enterprises and make them become an inseparable part of the supply chain of large enterprises, so that SMEs can achieve stable development.

Large enterprises can standardize the standards of products and services of SMEs through various kinds of technical assistance and enterprise credit, while small and medium-sized enterprises provide them with suitable parts or services under such guidance, and large and small enterprises will eventually form a multi-level, chain oriented vertical division of labor cooperation system.

Cooperation with large enterprises will help SMEs to maintain their technological advancement and market competitiveness, and pave the way for SMEs to develop a larger market.

Small and medium-sized enterprises in the talent and capital constraints, making it weak in technological innovation.

But we should see that China's innovation resources are mainly concentrated in scientific research institutions and institutions of higher learning.

On the one hand, small and medium-sized enterprises can improve their technological level and accumulate technical strength through collaboration with large enterprises. In addition, they can establish cooperative relations with universities and scientific research institutions, make innovations in technology, acquire intellectual property rights, and gradually form technical barriers.

Small and medium-sized enterprises with less investment and limited production capacity also enable these enterprises to implement more flexible production strategies.

Enterprises can always pay attention to the change of market demand, and carry out precise marketing for smaller target market, make their products more differentiated and personalized, and achieve success in a small number of target markets.