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Chinese official calls for restructuring of SMEs due to rising production costs

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BEIJING, April 22 (Xinhua) -- A Chinese official has called for restructuring of the nation's small and medium-sized enterprises (SMEs) in light of rising production costs.

Quan Zhezhu, Party Secretary of the All-China Federation of Industry & Commerce, said at a forum held by Peking University on Friday, the time when SMEs enjoy low costs of labor and raw materials had gone. Rising production costs has become an irreversible trend for SMEs.

Quan said though the Chinese government has introduced a lot of favorable policies to support SMEs, these enterprises still face grave challenges, most significantly rising production costs.

Due to inflationary pressure, the cost of many raw materials had increased, and the cost of labor and land had also risen. Also, SMEs face difficulties in getting loans or government subsidies, said Quan.

China has over 10 million SMEs, accounting for 99 percent of all enterprises. SMEs employ roughly 80 percent of the work force in urban areas, according to official statistics.

Quan suggested the government assist SMEs in their restructuring by supporting technological innovation and setting up service agencies to provide help to SMEs.

According to figures released by the Ministry of Industry and Information Technology (MIIT), industrial value-added output of Chinese SMEs grew 16.9 percent year on year in the first quarter of 2011, 2.5 percentage points higher than the overall industrial value-added output level.

However, the number of SMEs reporting losses rose 0.3 percentage points year on year to reach 15.8 percent for the first two months of the year, with total losses up 22.3 percent year on year, according to MIIT figures.

The Friday forum on the development of China's private enterprises, registered 2,000 participants from government, research institutes and the business sector.

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