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China’s Private Enterprises Are in Dire Straits

An 18-year-old mechanical processing company in the Pearl River Delta is facing difficulties just trying to survive. The head of the company posted a message on the Internet to complain about his situation. The message went viral on the Internet because it resonated with so many others. From the message, one can gauge the many problems that the company faces: The extremely narrow financing channels, rapidly increasing labor costs, a high tax burden, asset bubbles and inflation, and gray expenditures (money that must be spent "under the table"). The company is an individual case. However, it resonated with many others because private enterprises face a similar plight.

In recent years, due to the banks reluctance to lend, private enterprises have had to turn to loan sharks; raise their employees pay; in spite of structural tax cut calls, "decreases" have gradually, to the contrary, resulted in de facto "increases"; rising housing prices have led to higher rents, and rising inflation has caused the cost of raw materials to increase, so that private enterprises’ operating costs have risen faster. State-owned enterprises and local governments strictly control the high-profit industries, so private enterprises can only try to survive in the low-profit areas.

In the end, some private enterprises faced the dire fate of either having to close down or, in utter defeat, to hand their business over to others.

Source: Beijing News, July 17, 2012