Santa's Sleigh Brings Restored Order to SMEs
Jiang Kexing, the manager of Zhejiang Hongxu Trading Co Ltd in Yiwu, Zhejiang province, didn't need the official PMI data to tell him business outlook was improving.
In an interview with China Daily, the small goods manufacturer in this mega-market town said that he had "the hunch" as early as last summer, when orders for the Christmas season began to flood in, especially from the United States. Demand from Europe has remained sluggish, Jiang said. But slack sales to Europe were "more than made up, by the increase from the US," he said.
The increase came as quite a surprise to Jiang and the many thousands of private-sector manufacturers in the region. "We worked overtime to meet the tight delivery schedules," he said, with some help from the bureaucracy.
A new policy introduced by the Zhejiang government has greatly shortened the time to export processing of Custom's declarations. And that was a great help, according to Jiang.
"It used to take at least half an hour for the clearance to be completed by staff, not counting the time standing in queues, while it only needs a few minutes through a machine now," said Jiang.
Jiang added that it had been a tough year because of anemic overseas orders, and it came as a great relief that he got a flood of Christmas orders over a short time, and the business year will end on a happy note.
Most businesses in Yiwu are getting ready for the pre-Christmas peak. Yiwu is renowned as a commodity trade center.
According to the latest statistics released by the Customs Department, the value of products for Christmas passing the Yiwu Customs District during the first eight months, exceeded $79 million, which was 77.3 percent higher than last year.
"Although we have been affected by the European crisis, the demand for Christmas still brought us back on track quickly, in the middle of year," said Jiang.
Jiang added that he hoped the return of strong Christmas sales, will set the stage for a more profitable year in 2013.
There are more promising signs for small and medium-sized trading enterprises in China. They've been struggling with diminished orders and lower profits over the past year, continuously affected by the gloomy global economy.
The economy regained some manufacturing momentum, according to the purchasing managers' index, which indicated an expansion in factory output.
The PMI hit 50.2 in October, up from 49.8 in September and 49.2 in August, according to latest figures released by the National Bureau of Statistics on Nov 1.
A reading above 50 shows an expansion in manufacturing, suggesting that the upturn may fuel more robust business in the coming months.
"The sales volume for the third quarter is better than the first two quarters, although it is much lower when compared to the same time last year," said Shen Jiandong, the senior sales manager for Jiangsu Goldsun Textile Science and Technology Co Ltd. Goldsun, a company targeted a 30 percent increase on sales revenue for this year, but now expects it will experience 10 percent growth at the most.
Shen added that although the whole economic environment had dragged down production and sales volume of their products, the signs of recovery from the slump are getting them back to track.
Another key indicator, the HSBC PMI, an index that focuses more on small and medium-sized enterprises (SMEs), also showed an eight-month high of 49.5, in October.
"For the past three months, there are certain slight improvements in export volume, as the number of the orders from overseas is climbing back slowly with increasing demands preparing for Christmas," said Qian Shaotian, sales manager of Shanghai Yuanzong Hardware Co Ltd, which focused on trading hardware with mainly European clients in the last two decades.
Qian added that although the situation is getting better, the trading industry is not expected to recover rapidly in the coming year, in the face of tougher competition among local exporters which has worsened the trading environment, bringing lower profits, while the price of materials has risen.
Experts suggest the government should offer more assistance for SMEs to walk out of the miserable period as soon as possible.
"The economy's overall climate is getting better, although a great many SMEs are still struggling with the high cost of labor and materials, and sluggish demand," said Shi Jinchuan, dean of the Zhejiang University School of Economics.
Shi added that the government must continue to prioritize SMEs as they remained crucial to overall economic growth.
"Many policies being introduced are aimed at encouraging SMEs to find more ways to solve their own problems - that might be in brand rebuilding or cash flow, or upgrading their operational structures, for instance," said Shi.
Shi added that although certain SMEs are still struggling with the lack of orders and high expenses for labor and materials, the situation is getting better for the final quarter with more output of products to meet the increasing demands from abroad.