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Economist: Credit to SMEs key to solid recovery
By Qi Xiao (chinadaily.com.cn)
Updated: 2009-07-09 11:46 Ensuring credit and lending to China's small- and medium-sized enterprises (SMEs) will be essential to a robust economic recovery, said Dr Shumeet Banerji, a leading economist and CEO of the management and consulting firm Booz and Company. Speaking at a press briefing in Beijing on Wednesday, Dr Banerji said the ongoing economic crisis made life doubly hard for China's SMEs. "These are difficult times for enterprises in general and SMEs in particular," lamented Dr Banerji. Indeed, a recent report released by the Chinese Academy of Social Sciences shows that roughly 40 percent of China's SMEs have been forced out of business during the current financial crisis with another 40 percent in danger of going bankrupt.
"Although the current financial crisis is slowing down, credit and lending are still very tight", he said, which makes financing more difficult for SMEs. Economic data reveals that 99.3 percent of Chinese enterprises are SMEs, which contribute 60 percent to the nation's GDP. They also provide about half of the nation's tax revenues and three-quarters of urban jobs. However, statistics from the Ministry of Industry and Information Technology (MIIT) indicate that of the 4.8 trillion yuan credit ($700.3 billion) pumped into China’s financial system in the first quarter of 2009, a mere five percent trickled to SMEs. The government's 4 trillion yuan stimulus package tells a similar story. Under the current circumstances, Dr Banerji advised those enterprises to carefully conserve cash to keep going and suggested that governments lend more support to cash-starved SMEs. "The government should pay close attention to SMEs at any time, especially in difficult times like these," he said. The Chinese government's pro-active intervention, though, is a key advantage over other major economies, he added. He said that governments and enterprises are very good at working together in China, which could facilitate policy execution in a crisis such as the present one. Before joining the firm, Dr Banerji was a member of the faculty at the University of Chicago, Graduate School of Business. He received his PhD from the Kellogg Graduate School of Management at Northwestern University. (For more biz stories, please visit Industries)
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