Compared with State-owned enterprises, SMEs are much more vulnerable. Latest statistics from the National Development and Reform Commission show that in the first six months of 2008, about 10 percent of SMEs reported an average 15 percentage point drop in their industrial output growth from a year earlier to 30 percent. This indicates a significant shrinkage in their profit margins. SMEs have also been hit by the credit crunch resulting from the government’s tightening monetary policy to fight inflation.

Many reasons are unfavourable to SMEs. At a time when credit is tight, banks have understandably focused lending operations on traditional customers — large State-owned enterprises, which are much more creditworthy than SMEs. According to figures released by the China Banking Regulatory Commission, total loans obtained by SMEs in the first quarter of 2008 dropped by 30 billion yuan year-on-year.

In order to solve the problems of SMEs, the central government has taken several steps to provide the capital- thirsty SMEs with a wider access to loans. In early August, the National Development and Reform Commission said it was considering establishing a bank specializing in lending to SMEs to broaden their sources of finance. A week later, the People’s Bank of China increased the annual loan quota by 5 percent for national commercial banks and by 10 percent for local commercial banks, taking into consideration that SMEs make up a larger proportion of their clients.

In addition to the efforts made by the central government, many local private-sector trade agencies have organized financing opportunities for SMEs.

In a lot of provinces of China, more and more micro credit lenders are in the process of being established. As we all know, private capital is playing an increasingly important role in funding the growth of SMEs. Now, more private capital is being pumped into SMEs in the form of micro credit, and eases their capital shortage.

As the situation of SMEs is becoming better, it is believed that SMEs like BPOVIA will have a brighter future.

Are you interested in the business opportunities in China?

China is one of the world’s great growth markets and is likely to be for many years to come. Foreign companies often face difficulties in assessing Chinese market demand and enacting effective strategies because of the language barriers, culture differences, and high expense.

BPOVIA is the leading virtual assistant and Knowledge process outsourcing (KPO) service provider in China. BPOVIA is the only virtual assistant company ever been nominated for the prestigious “Red Herring 100 Asia” Awards 2008. Combines international perspective with local know-how, BPOVIA can provide our clients China business development service and help our clients doing successful business in China.

Please visit http://www.BPOVIA.com/ for details about our service.