China's Small & Medium Sized Enterprises in Crisis

According to a new survey published by Alibaba Group and Peking University on shows that small businesses in China are yet in crisis once again. As per the country's GDP data SME's account for 65 per cent of the country's GDP and provide almost 80 per cent of its jobs.

The major reason of this downfall is the increasing cost of labour and materials in China. In the said report over 2300 SME's were interviewed in one of the China's most economically active states, Zhejiang province.

“The interviewed companies' average capacity utilisation ratio [which measures how efficiently plants are being used] this year and last stands at 72 per cent, lower than in 2008 and 2009,” said Simon Hu, a vice president of Alibaba Group.

As per the survey findings one-fifth of SME's in Hangzhou and Wenzhou have suspended or partly suspended production amid economic crisis.

While the study confirms that SMEs have almost no chance of getting access to bank credit, this is not the companies' main problem.

Eighty-two per cent of respondents identified rising labour costs as a problem for them them in 2010 and 2011 while only 52 per cent of them had this problem before 2010.

The jump regarding material costs is similarly drastic, from 55.6 per cent to 81 per cent.