Oct. 14 (xinhua) -- Evening lights shining from surrounding factories shatter the dark silence dominating buildings owned by the Zhengdeli Shoes Company. Piles of unfinished shoes sit the company's warehouse and workshops. A few security guards stand by a gate where workers sporadically come and go.
This was the scene after news broke that the company's boss, Shen Kuizheng, committed suicide to escape debts. The company is located in Wenzhou, China's entrepreneurial capital.
Shen is just one of at least 80 businessmen in the eastern coastal city who have disappeared, committed suicide or declared bankruptcy to invalidate debts owed to individual creditors pooled from the informal lending market and employees.
News of the incidents has even made waves in the central government. During a visit to Wenzhou on Oct. 5, Premier Wen Jiabao urged financial support for cash-strapped small businesses. However, a multi-department investigation has shown that the crisis has largely been kept under control.
INVESTIGATORS DENY MASSIVE COLLAPSE
Previous media reports stated that small- and medium-sized enterprises (SMEs), which contribute to 60 percent of China's industrial output and create 80 percent of the country's jobs, have faced an unprecedented crisis this year as they struggle to survive a liquidity crunch amid the country's tightened macroeconomic control policies.
However, the People's Bank of China, or the country's central bank, the Ministry of Industry and Information Technology (MIIT) and the National Bureau of Statistics (NBS) came to a different conclusion based on recent investigations conducted in southeast China's Guangdong Province and the eastern provinces of Zhejiang and Jiangsu, the country's most developed regions.
"A massive collapse of small businesses does not exist, even though some SMEs have been confronted with cash shortages. The number of SMEs keeps increasing, as broken-down enterprises are fewer in number than newly founded ones," said Wang Wenbo, an NBS official, at a conference held by the Chinese Academy of Social Sciences on Monday.
A final report from the investigations has not yet been issued.
Investigators found that shifting over to real estate speculation dragged many SMEs into cash shortages, forcing them to halt operation. They concluded that the country's macroeconomic control policies, aimed at cooling inflation and reign in the runaway property market, did not lead to the funding shortages.
"Many business owners actually prefer tightening measures, because loose monetary policies can boost the prices of raw materials. Policy changes are not the key to their cash shortages," Wang said.
SMEs that have focused on their primary businesses face little financial difficulty, the investigation showed.
GOVERNMENT'S EFFORTS TO WEATHER CRISIS
"Small enterprises should be a priority for bank credit support and enjoy more preferential tax policies," Premier Wen said during his visit to Wenzhou. "Banks should increase their tolerance for the non-performing loan (NPL) ratios of small enterprises and reduce the cost of securing credit."
Wen also requested a crackdown on the high-interest informal lending market, which operates outside the country's banking industry. The informal lending market between companies and individuals provides high-interest loans to many private entrepreneurs facing a cash squeeze.
In response to Wen's appeal, the Zhejiang provincial government has sent 11 work groups to oversee a bank bailout of private firms suffering from the liquidity crunch. A total of 25 banks in Wenzhou pledged on Tuesday to increase lending in order to help private firms weather the debt crisis.
"The government will help those companies that are trapped in the financial crunch but have the ability to survive the difficulties," said Chen Derong, vice governor of Zhejiang province.
Despite the debt problems facing many of Wenzhou's SMEs, it seems that some of the city's runaway bosses are returning.
Hu Fulin, president of the Xintai Group, China's largest eyeglasses manufacturer, fled to the United States from Wenzhou on Sept. 21 to escape a 1.5-billion-yuan debt. He returned to China on Monday.
"I hope my company can overcome the current difficulties with the government's support," Hu said upon arriving in Wenzhou.
Sun Fucai, board chairman of the Aomi Fluid Equipment Co., Ltd., also returned to Wenzhou on Monday.
"I believe my company will get back on track, as the government has pledged strong support in helping me get bank loans," Sun said.
The MIIT is set to unveil a new policy to help small businesses to get through financial difficulties. However, the cash shortages are a chronic problem that cannot be solved all at once, Xie Sanming, an official from the MITT, was quoted as saying by the 21st Century Business Herald.
The average net profit margin of China's SMEs was less than 3 percent from January to July, much lower than the international average of 6 percent, according to a report released by the MIIT.
The report also said that 12.7 percent of small businesses have posted losses, with the size of the losses rising from 22.2 percent in the first two months of this year to 46.9 percent in the first seven months.
"We hope the government's relief measures can not only pull SMEs through financial difficulties but also boost their industrial transformation," said Yang Xiaoping, chairman of the Zhejiang branch of the China Banking Regulatory Commission.