40 b yuan restructuring package set

The Guangdong provincial government is set to announce a 40 billion yuan package to assist small and medium-sized enterprises in restructuring.

Wang Yang, Party secretary of Guangdong, made the remarks when meeting with more than a dozen Hong Kong media chiefs visiting the provincial capital Guangzhou in late July.

The government will encourage the SMEs to move their businesses to the less developed eastern, western and northern parts of Guangdong, he said.

In return, the enterprises agreeing to the relocation will receive electricity, water and transportation subsidies.

Guangdong is relatively strong in SMEs, but they face a range of difficulties, said Chinese Premier Wen Jiabao during a study tour to Guangdong in mid-July.

He urged greater support to SMEs in credit, taxation and industrial policies.

Growing prices of raw materials, higher costs of labor, tightening policies for the processing trade, lower tax rebates on exports and the appreciating Chinese currency all raise difficulties for smaller businesses in Guangdong, most of which are export-oriented.

In the first five months of this year, 35,000 enterprises canceled registration in Guangdong, representing a 35 percent increase from last year. About 40,000 new enterprises registered in Guangdong during the period.

Between 2006 to February this year 599 manufacturing firms have moved away from Shenzhen. Most were labor-intensive and resource-consuming firms in the electronics, machinery, garments and furniture industries.

In a conference held by Guangdong government in mid-July, challenges facing enterprises, especially SMEs, were cited as one of drags on economic growth in the first half of this year.

Wang said that operational difficulties are unavoidable during industrial restructuring for labor-intensive enterprises that lack innovation.

To deal with difficulties, he said Guangdong would use 40 billion yuan to help distressed SMEs relocate.

Hong Kong has been the source of about 70 percent of overseas investment into Guangdong in the three decades of China's reform and opening-up.

"Hong Kong-funded SMEs have a bright future in Guangdong," Wang noted to Hong Kong media chiefs.

Source: China Daily