E. China firms endure halts in H1

HANGZHOU -- A recent report revealed that major industrial enterprises in East China's Zhejiang province have seen production cutbacks or halts in the first half of the year, arousing concerns about the manufacturing industry.

The recently-closed 34th session of the Standing Committee of the 11th Zhejiang Provincial People's Congress issued a survey showing that the manufacturing-based province's economy has experienced insufficient demand and a sluggish market.

The survey said many major industrial companies in Zhejiang, or those with annual revenues of more than 20 million yuan ($3.2 million), have had to tackle difficulties such as decreasing profits, rising operating costs and shrinking orders over the past six months.

More than 60 percent of major industrial enterprises in the city of Wenzhou have suffered from production reductions or halts, the survey said.

It showed that 140 out of 3,998 major industrial enterprises in Wenzhou have stopped production, while 2,276 enterprises have seen year-on-year production decreases in this year.

"We have had to face layoffs and a sharp reduction in orders this year," said Wu Mingyao, administration manager of Wenzhou Jingqingyu Shoes Co Ltd.

Enterprises in Wenzhou are finding bank loans increasingly hard to obtain, as the city's banks have had to deal with a rising non-performing loan ratio during the past 11 months.

The NPL ratio of the banking industry in the East China city rose for 11 straight months to reach 2.43 percent by the end of May, much higher than the country's average level of 0.9 percent by the end of the first quarter, statistics from the financial office of Wenzhou howed.

In June 2011, the Wenzhou banks' non-performing loan ratio was only 0.37 percent, the official data showed.

Zhou Dewen, head of Wenzhou's Small and Medium-sized Enterprise Promotion Association, said the city has many labor-intensive enterprises that are prone to the uncertain global economic situation and ever-increasing labor costs.

Some sectors in Wenzhou, including real estate and the photovoltaic and shipbuilding industries, have been hit by tightened policies and excess capacity, Zhou added.

The survey also indicated that industrial enterprises in the province have seen profits decline in the first five month of 2012 while facing rising operating costs and declining orders during the same period.

In the first half of 2012, Zhejiang's export growth declined 17.1 percent compared to the same period in last year, according to the survey.

Li Lifeng, a cigarette lighter manufacturer in Wenzhou, said the harsh situations he has encountered recently have been much more severe than the difficulties he experienced during the global economic crisis in 2008.

"I hope my company can overcome the present troubles. I will feel okay as long as we can recover our investment costs," said Li.

Workers and employees in these enterprises have also felt the instability.

"I have drifted from job to job in different plants during the past several months and I never know when I may lose my present job, as the company could go bankrupt overnight. I'm just taking it one day at a time," said Zhang Jianing, a worker at a shoe manufacturing plant in Wenzhou.

Chen Derong, the Communist Party of China committee secretary of Wenzhou, said the outflow of enterprises from Wenzhou will create more difficulties for the local economy.

The government still has confidence about the future of the manufacturing-oriented province's economy, as the overall local economy is in good shape, said Gao Yiliang, deputy director of the provincial development and reform commission in Zhejiang.

"Enterprises in Zhejiang have the advantages of a sound basis, an appropriate development environment and good relations with the government," Gao said.

Professor Fu Yunsheng from the research institute of economics under the Zhejiang Academy of Social Sciences said enterprises in Zhejiang should explore the international market actively in order to maintain steady growth in exports.

Policies requiring tax reductions and exemptions should be implemented by the government to effectively reduce the burdens facing enterprises, Fu said, adding that new sources of economic growth ought to be cultivated as well.