HSBC's China PMI Remains Sluggish, Living Environment for SMEs Needs Improving

SHANGHAI, Aug. 24 (SMM) -- According to data from HSBC on August 23rd, initial China PMI for August was 49.8, rebounding slightly from July's 49.3, but still below the 50-point mark. China's PMI data released by HSBC is mainly based on manufacturing activities of China's small and medium-sized enterprises (SMEs), and the continuous sluggish reading of HSBC's China PMI shows that China's SMEs' living environment is not optimistic.

Since the start of 2011, HSBC's China PMI has been reported in line with China's official PMI data, a signal that China's manufacturing activities may slow down. The falling HSBC's China PMI means stagnation in the private sector represented by SMEs since 70% of sampling enterprises surveyed for the data are SMEs. SMEs are now in the face of rising energy raw material prices, increasing labor costs, heavy quotas of tax and continuing RMB appreciation, which significantly raised costs at those enterprises and cut their margins. As a result, profits at many mini-enterprises fell sharply, with some even on the verge of incurring losses. Financing difficulties for SMEs did not ease, especially when China is implementing prudent monetary policies to cope with high inflation. It's been said that SMEs will likely experience a new wave of closures.

According to requirements from China's State Council, a meeting is being organized by a special State Council group to find measures to further promote development of medium-to-small sized enterprises in China. How to provide more target-oriented support policies is an issue that relevant departments must solve. SMEs at present contribute 70% of employments in China, and whether or not they can get through current difficulties will impose great impacts on healthy development of China economy as well as the country's restructuring.