Small Medium Enterprises are Facing Huge Difficulties in Shenzhen
The series of factory shutdowns that happened in Wenzhou due to the credit crunch haven’t reached Shenzhen, but a large number of SMEs in the city might soon be facing huge difficulties because of rising materials and labor costs.
A recent survey showed that SMEs in Shenzhen are enjoying more financial channels than in other places. The survey also showed that interest rates on banks loans in Shenzhen are around 15 percent, with the small loan firms rate is at 20 to 30 percent and private financing interest can reach 30 to 50 percent.
SMEs found around the Pearl River Delta are slowly losing their momentum and profitability has dropped 30 to 50 percent since last year. Some SMEs have said that the reason for these losses is the sharp increase in materials that grew from 30 to 80 percent in the last year. Increased labor costs also contributed to the profit loss of an average of 20 to 30 percent since most wages have risen 100 percent, especially for those workers working as high level technicians.