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70% Of Small Enterprises Are Expected To Lose In The Next Six Months

The National Development Research Institute of Peking University and Alibaba Group

in the September visited 95 small businesses and 15 local banks in the Pearl River Delta, Guangzhou, Shenzhen, Dongguan, Zhongshan, Foshan, Jiangmen and surveyed 2889 small businesses.

Most of these companies' sales are less than 30 milllion yuan and have less than 100 employees. Alibaba Group's Vice President Mr Hu said that as the representative of the Chinese small businesses, these companies have very strong vitality, but are lack of effective guidance and financial support. The negative factors are eroding the lifeblood of small businesses little by little.

The data show that 72.45% of small businesses are expected to have no profit or small loss over the next six months. The confidence on the business in the next six months is low. 3.29% of the small businesses may substantial loss or go out of business over the next six months. The attitude for the future operation is pessimistic.

In fact, the profit decline this year has become the most difficult hurdle to be crossed for the small businesses. The statistics said the profits of small businesses this year have a serious decline. Compared with 2010, the average profit decreased 30% to 40%. The operational difficulties increased.

The raw materials and the labor costs are still important factors that squeeze the profits of small businesses. The raw material costs of most sectors increased approximately 20% to 50% compared with 2010. The raw material prices of the apparel industry rise even 30% to 80%. The workers' wages of small businesses in the Pearl River Delta region rose 20% to 30% compared to 2010. The wage of some senior technicians rises even more than 100%.

The difference is that compared with last year, small businesses are now face dwindling orders. Affected by the European debt, the U.S. debt crisis, orders of small businesses in the Pearl River Delta region fell by about 30% compared to in 2010. Together with the order snatch of Vietnam, India and other low-cost regional enterprises, low-cost domestic small business has no space. In addition, the real estate control has led to orders for building materials and related ancillary products gradually reduced.

The analysts of the industry say that most direct impact of the order reduction is the capacity utilization of the small businesses. At present, the average operating rate of small businesses in the Pearl River Delta fell to 70.92%.

by: Amanda Xia
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