40% Small and Medium-Sized Chinese Companies Close Down

[GoFlyKiteNow]

Many Small and Medium-Sized Chinese Companies Close Down
China’s first-quarter growth rate called into question

The Chinese Academy of Social Sciences reported a recent survey showing that 40 percent of China's small and medium-sized companies have closed down, and another 40 percent are on the verge of closing down during the current financial crisis.

Moreover, 99 percent of China's industry is composed of small and medium-sized companies which contribute more than 60 percent of GDP, 50 percent of national revenue, and 75 percent of urban employment.

This report, therefore, raises a question about the Chinese regime’s report of a 6.1 percent GDP growth rate for the first quarter.

Peter Chen, a senior researcher for the Chinese Academy of Social Sciences, reported that this survey took place over the past six months, and the result is yet to be finalized.

During a CCTV interview, Chen said, “A large portion of China’s companies are facing a difficult situation, and some have even closed down. The number closing down is far above average. In the past, companies closed down when the GDP growth rate was 5 percent. However, the current reported GDP growth rate of 6.1 percent is not borne out by the existing economic environment."

“Insufficient investment could be a reason. Some companies have a market share and customers, but cannot continue to manufacture due to lack of capital,” Chen continued.

Yong Yu-Chin, Deputy Director of the Small and Medium-Sized Industries Service Center in Shenzhen City, indicated that more than 60 percent of the industries in Shenzhen have encountered financial difficulties. In general, they need short term loans in amounts ranging from US$1.43 million to US$1.75 billion.

The majority of the 42 million small and medium-sized companies in China are reported to lack collateral assets. This has also increased the risks involved in bank loans. In 2008, non-performing loans to small businesses reached 11.6 percent.

The China Banking Regulatory Commission (CBRC) issued the document “Guidance for Small Business Loans” in July 2005, requiring that loans to small and medium-sized companies should provide higher amounts and require higher incremental payments than other loans. However, these measures have not been implemented. Some believe this is because of concern that high-risk loans to small and medium-sized industries could lead to substandard bank loans and subsequent defaults.
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[GoFlyKiteNow]

Paradoxical Statistics

The imbalance Xu mentioned is well reflected in the economic paradoxes discovered by Liu Yuanchun, Associate Dean of the School of Economics of People’s University in Beijing. Based on observations of this year’s economic statistics, Liu listed eight pairs of conflicting facts, including:

1. Sharp increase in investment vs. fast drop in export and import
2. Rising industrial added value vs. lower increase in electricity consumption
3. Fast industrial growth vs. slow financial growth
4. The increase in cargo transportation vs. the decrease in port throughput
5. The increase in nominal consumption vs. the decrease in actual consumption
6. The increase in stock index vs. the decrease in the profit of listed companies
7. The increase in industrial added value vs. the decrease in industrial profit
8. Increasing real estate sales volume vs. stagnant actual real estate investment

 

[KennyMGM]

small industries and business is the backbone for developing nations

 

[zuoom]

if 40% of the less effective/efficient companies close down. wouldn't it be a better scenario? (from a simplistic POV)

 

[GoFlyKiteNow]

if 40% of the less effective/efficient companies close down. wouldn't it be a better scenario? (from a simplistic POV)

Not necessarily. Most of these companies could be as good as the ones that remain open. They collapsed due to shrunk markets in the Western nations, which during boom times ( reckless borrow and spend )..provided a big market
to these companies. That export market does not exist and will not exist in the future.

 

[halsey02]

PRC should approach their relations from Fujian, the "guest people", the Ah Kor from Hainan, the Catonese..the whatever...from a place called the NANYANG, to be precise their brethen living in the 'tiny red dot'; for HELP!.

 

[zuoom]

Not necessarily. Most of these companies could be as good as the ones that remain open. They collapsed due to shrunk markets in the Western nations, which during boom times ( reckless borrow and spend )..provided a big market
to these companies. That export market does not exist and will not exist in the future.

i was looking more on the side of excess capacity.

 

[Bernardcraig20]

This is very crucial to be aware with

 

[GoFlyKiteNow]

i was looking more on the side of excess capacity.

Even those that remain are saddled with excess capacity. The stimulus package created a spending boom for this year and that made matters worse in the long run. Now China's warehouses are filled with goods produced with this stimulus pack..from cars to consumer goods. How long these goods will remain in limbo is anybody's guess and, there is the question..what about 2010 ?.
Can they produce more with more stimulus money and keep storing them?.

One thing is for sure. At some point in time, these goods will have to be released out into the market at rock bottom prices via foreclosures and and due to debt recall etc. At that time, we will see a huge mass of goods coming in and being sold at throw away prices.

The loser is China and its reserves.
China made a fundamental mistake. Growth at any cost and the focus being exports led economy. HK, taiwan and other nations took advantage of this
poilicy and exploited it to the max..they have nothing to lose. When the going gets tough, just close and exit..leaving the masses in dire straits and the country ravaged by pollution and economic hardship.

We are seeing that now.

 

[KennyMGM]

This is very crucial to be aware with

will all this affect singapore stock and property market?

 

[zuoom]

Even those that remain are saddled with excess capacity. The stimulus package created a spending boom for this year and that made matters worse in the long run. Now China's warehouses are filled with goods produced with this stimulus pack..from cars to consumer goods. How long these goods will remain in limbo is anybody's guess and, there is the question..what about 2010 ?.
Can they produce more with more stimulus money and keep storing them?.

One thing is for sure. At some point in time, these goods will have to be released out into the market at rock bottom prices via foreclosures and and due to debt recall etc. At that time, we will see a huge mass of goods coming in and being sold at throw away prices.

The loser is China and its reserves.
China made a fundamental mistake. Growth at any cost and the focus being exports led economy. HK, taiwan and other nations took advantage of this
poilicy and exploited it to the max..they have nothing to lose. When the going gets tough, just close and exit..leaving the masses in dire straits and the country ravaged by pollution and economic hardship.

We are seeing that now.

how do you see that now?

what i do see is actually a reversal of prices. as in things from China are actually rising (slightly) instead of dipping.

i know of the example about pig farmers buying steel/copper and stockpiling, but things in general are on the rise. OR would this be currency works at play?

so far, what many think is that China is superbly dependent on export. (which is true to some companies... those that do 100% export). but they still do have a fair amount of domestic consumption. the only thing is how much can and will they "eat".

will all this affect singapore stock and property market?

for sure.

big mother sneeze, we cough.

why do you think we built 2 x Casino/IR?

 

[chewed]

how do you see that now?

what i do see is actually a reversal of prices. as in things from China are actually rising (slightly) instead of dipping.

i know of the example about pig farmers buying steel/copper and stockpiling, but things in general are on the rise. OR would this be currency works at play?

so far, what many think is that China is superbly dependent on export. (which is true to some companies... those that do 100% export). but they still do have a fair amount of domestic consumption. the only thing is how much can and will they "eat".



for sure.

big mother sneeze, we cough.

why do you think we built 2 x Casino/IR?

you guys should focus on the numbers of SMEs that failed in SG the last 2 years.

The numbers are staggering...

 

[GoFlyKiteNow]

how do you see that now?

what i do see is actually a reversal of prices. as in things from China are actually rising (slightly) instead of dipping.

i know of the example about pig farmers buying steel/copper and stockpiling, but things in general are on the rise. OR would this be currency works at play?

so far, what many think is that China is superbly dependent on export. (which is true to some companies... those that do 100% export). but they still do have a fair amount of domestic consumption. the only thing is how much can and will they "eat".

price rise is due to inflation ushered in by the huge spending package.
plus the increase in indirect duties and tax hikes to curb imports
of raw materials etc. The excess f\funds not absorbed by the equity
and property markets flow in to consumer products and commodities
thus increasing the price pressure.

internal consumption is indeed large, but the empahsis is on local
goods with low import content.